Daily Profit : Facebook

Facebook IPO Aims for Record Deal

Ian Wyatt — Tue, 08 May 2012 13:42:00 GMT

We already knew the Facebook IPO was going to be big. Now we know how big – or at least how big Mark Zuckerberg and company want it to be.

The social network giant announced today that it is targeting a $96 billion deal in its much-anticipated initial public offering on May 18. If it succeeds, that would be the richest debut ever for a U.S. stock.

Facebook’s goal is ambitious, to say the least. For starters, a $96 billion valuation would be 96 times the $1 billion in earnings the company reported in 2011. It would also more than quadruple the $23 billion valuation Google (Nasdaq: GOOG) achieved in its 2004 IPO – the gold standard of tech IPOs.

In fact, a $96 billion valuation out of the gates would be 60% higher than the current record of $60.2 billion, established by UPS (NYSE: UPS) in 1999. And Facebook is only eight years old. The United Parcel Service had been in existence for 92 years when it went public.

To get to a $96 billion market cap, the Facebook IPO is expected to sell 337 million shares at a price between $28 and $35 a share. If the stock prices at the low end of that range, Facebook’s initial valuation would “only” be $77 billion – still a record and still 77 times earnings.

If Facebook raises the $13.6 billion analysts are expecting from its IPO, that would trail only Visa (NYSE: V) and General Motors (NYSE: GM) for the most money raised in a U.S. IPO.

Editor's note: I'm finishing up research on Facebook's IPO as well as two others coming up this year. The report details how to maximize returns from IPOs and the pitfalls to avoid. I expect to release it in the next couple of weeks before the Facebook IPO. So keep reading my column and I'll let you know when it's available.

So it’s safe to say the Facebook IPO is in a league of its own.

Tech Stocks That Will Benefit from Online Ad Sales Overtaking Print

Ian Wyatt — Tue, 24 Jan 2012 21:09:00 GMT

Good news recently surfaced for tech stocks like Google (Nasdaq: GOOG), Yahoo! (Nasdaq: YHOO) and Microsoft (Nasdaq: MSFT).

For the first time ever, online ad sales are expected to outpace print sales in 2012, according to an eMarketer study. Online advertising is expected to generate $39.5 billion in sales this year, while print ads are expected to fall to $33.8 billion.

Not that people didn’t see this coming. The Internet has been steadily replacing newspapers and magazines as the place where the biggest companies run their ads. As a former newspaper reporter, I’m a little saddened by the news. Print media has been dying a slow death. This just further confirms it.

But it’s good news for websites like this one, and better news for some of the online sales leaders. Google, Yahoo and Microsoft are the top dogs among publicly traded Internet companies. AOL (NYSE: AOL) and Marchex (Nasdaq: MCHX), a leader in mobile ad sales, are other tech stocks that rely heavily on online ad sales.

But the company that stands to benefit most from the projected online sales increase has yet to go public. With an estimated $2.2 billion in advertising revenue last year, Facebook has become the new leader in online sales revenue, with a 17.7% share of the market. The company is expected to go public the third week of May in one of the most eagerly anticipated IPOs in recent memories. The latest news will only add to the anticipation.

Yahoo and Google are Nos. 2 and 3 in online sales, respectively. But Google is expected to be the fastest-growing company in display ad revenues in 2012.

Further down the road, eMarketer expects online ad sales to grow 17.7% in 2013 and 13.5% in 2014. That bodes well for the long-term future of some of the leading tech stocks.

How to Play Middle East Unrest

Ian Wyatt — Tue, 22 Feb 2011 20:46:00 GMT

Once again, China has raised reserve requirements for banks to slow down lending and, hopefully, slow inflation, too. China reports that inflation accelerated to 4.9% in January. Part of the reason is that drought has damaged China's grain production and food prices are up.

Chinese banks lent $158 billion in January. That was more than double the rate of lending in December. Apparently, lending typically surges in the early months of the year in China.

It's no secret that Chinese stocks are out of favor right now. Fraudulent accounting and a general sense that the numbers for Chinese companies aren't reliable has contributed to the bear market for shares.

It's likely that the numbers from the Chinese government aren't reliable, either. If I had to guess, I'd say that inflation is probably hotter than what's being reported. But the one thing that is clear is that China will need to do more to combat inflation.

Reserve requirements for banks now stands above 19%. That's much more than in the U.S., and we might conclude that Chinese banks are healthier than U.S. banks. But again, with the legitimate concerns about official numbers, there's no real way to gauge the health of Chinese banks.

*****It seems inevitable to me that China will have to let the yuan rise in value against the U.S. dollar. It's also easy to understand why China is resisting. The relatively cheap yuan keeps Chinese goods competitive. Letting the yuan rise would slow foreign investment in China, which would, in turn, affect employment and wages.

*****I'm not sure anyone would have predicted that Facebook could take down a government. But we are definitely seeing the free flow if information on the Internet empower people to oppose repressive governments in the Middle East.

It's absolutely fascinating, and there's no way you can't cheer for the people of these countries as they put their lives on the line for a better way of life. The truth is setting them free.

Now, I understand the concern that fundamentalist religious groups with anti-American sentiment could step into a power vacuum and take control, like what happened in Iran after the Shah was ousted. But I would point out that even Iran's government is under extreme pressure. I'm not sure the general populace in the Middle East wants religiously oriented governments.

On the contrary, the people seem to want governments that represent their economic interests. They want to make more money and they want access to information. Basically, they want freedom. And ironically, that means technology and the Internet. It means iPods and iPhones, not imams. Mustangs, not mullahs.

*****When people talk about black swans, which are basically unforeseen catalysts that have profound economic impacts, we often think of something negative. But the unrest in the Middle East has the potential for a very positive outcome.

Just imagine of these countries became true end markets, fully participating in the global economy? American companies would be huge beneficiaries.

Of course, such change won't happen overnight. And it won't come easy. So far, I think it's no coincidence that strongest resistance has come in countries that don't have a lot of oil. But resistance is there in Iran, and it would be a mistake to think that it simply won't come to Saudi Arabia.

If you don’t own oil stocks already, you absolutely must when there's unrest in the Middle East. I think we've only seen the beginning of oil prices reacting to the unrest in the Middle East. There is a very real possibility that oil prices will move significantly higher before this whole scenario plays out.

I would also recommend that you seek out oil stocks in politically stable countries, like the U.S. or Canada. Canada has oil sands, and the U.S. has the Gulf of Mexico and the Bakken oil pool.

Energy World Profits readers have made some outstanding gains from Bakken oil producers. And I just recommended an emerging Bakken player on Monday. Shares are already up 12% and I think there's at least 25% more gains coming as this stock reaches a fair valuation. But if oil prices spike higher, shares could move much higher. For more, click HERE.