Should an­a­lyst up­grades value Face­book as much as Wal-Mart?

Financial Mirror (Cyprus) - - FRONT PAGE - By Chris Lange

Fresh calls, hot off the press, and Face­book Inc. (NAS­DAQ: FB) is in the spot­light this time. A cou­ple of in­vest­ment banks have weighed in on the so­cial me­dia pow­er­house. Piper Jaf­fray and JMP Se­cu­ri­ties were on the calls for Mon­day. What is in­ter­est­ing here is that if the higher an­a­lyst call is cor­rect, then Face­book would be worth roughly the same as Wal-Mart Stores Inc. (NYSE: WMT) in mar­ket value.

Should Face­book be val­ued the same as Wal-Mart? This may not seem like an ap­plesto-ap­ples com­par­i­son on the sur­face. Maybe it isn’t. Still, what are in­vestors sup­posed to think when ma­jor eco­nomic fix­tures and pow­er­houses are val­ued the same as so­cial me­dia?

Piper Jaf­fray main­tained a Buy rat­ing and moved its price tar­get up to $92 from $84. JMP Se­cu­ri­ties main­tained a Mar­ket Out­per­form rat­ing and raised its price tar­get to $97 from $94, im­ply­ing an up­side of about 16% from cur­rent prices. This call was made due to Face­book tak­ing on more mar­ket share in the over­all ad­ver­tis­ing mar­ket.

If Face­book shares rise to the higher $97 price level, it would put Face­book on the same play­ing field as Wal-Mart in terms of mar­ket cap. Face­book’s cur­rent mar­ket cap is $234 bln and Wal-Mart’s cur­rent mar­ket cap is just un­der $270 bln.

Wal-Mart and Face­book may be near­ing each other in mar­ket cap, and this call im­plies that the so­cial me­dia leader could be worth the same or more than the world’s largest re­tail store — if the an­a­lyst from JMP Se­cu­ri­ties is right on its tar­get of $97.

The big­gest is­sue may be just how much each com­pany means to the econ­omy. Face­book is ex­pected to have rev­enues of $17.1 bln in 2015, while Wal-Mart is ex­pected to have rev­enue of $492 bln in 2015. Wal-Mart’s net in­come at­trib­ut­able to hold­ers for the past year was $16.4 bln, ver­sus $2.925 bln for Face­book.

Lead­ing up to th­ese calls, Face­book has been mak­ing some head­lines. This week Face­book will host its De­vel­oper Con­fer­ence in San Fran­cisco on Wed­nes­day and Thurs­day. At this event, prod­uct ex­perts from Face­book, Instagram, Parse, Ocu­lus, LiveRail and other apps will share what they have learned and built for de­vel­op­ers, and this should be an in­ter­est­ing view from the out­side look­ing in.

Last week, Face­book added a new fea­ture to its mes­sen­ger app. Users now can send money dig­i­tally through their Face­book net­work to friends. This fea­ture ap­pears to be a nat­u­ral pro­gres­sion of so­cial me­dia, as other apps like Venmo have re­cently been de­vel­oped. In the same field, this could also be con­sid­ered a com­peti­tor of Ap­ple Pay, Google Wal­let or PayPal.

The high­est price tar­get that we have seen was made by Piv­otal Re­search in late Jan­uary, for $106, im­ply­ing an up­side of 26%. The stock has a con­sen­sus an­a­lyst price tar­get of $91.89, im­ply­ing an up­side of nearly 10%.

Shares of Face­book were rel­a­tively flat at $83.79 mid­day Mon­day. The 52-week trad­ing range is $54.66 to $84.60.

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