Facebook (FB) at $50; How Far Will It Rise?

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Three months ago Facebook ( FB ) was a cautionary tale. Now it's one of the fastest rising stocks on the market.

Shares of the social network have more than doubled in the last three months, sparked by a late-July earnings report that beat Wall Street estimates and revealed the company's growing mobile advertising presence.

Prior to that report, Facebook shares were trading at $26.50 - 30% below their $38 IPO price when the stock debuted in May 2012. This morning they opened above $50 for the first time ever.

How high can Facebook go? The P/E suggests it's extremely overcooked. The stock currently trades at 223 times trailing earnings. Even the forward P/E is high, at 52.

But social media stocks are notorious for their high valuations. LinkedIn ( LNKD ) , which is essentially Facebook for the professional world, is trading at a preposterous 952 times earnings. That's nothing new. Its P/E has been in the stratosphere for years. And yet the stock continues to rise higher, doubling in the last year and rising 213% in the last two years.

LinkedIn is proof that ridiculous valuations aren't roadblocks to continued share price appreciation - at least not when it comes to social media stocks. That's why at least one analyst among the 35 listed on Yahoo! Finance has a target price of $60. Most, however, think the stock's already overcooked.

The average price target is $46.28, or 7% below its current price.

But if Facebook beats third-quarter earnings estimates by 36% the way it did last quarter, then the stock may still have plenty of room to rise.



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Stocks

Referenced Stocks: FB , LNKD

Wyatt Investment Research

Wyatt Investment Research

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