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