Overview On Social Media Before Facebook IPO

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Includes: FB, GKNT, GOOG, GRPN, LNKD, MEET, SINA, YELP, ZNGA
by: Tiago Romão

The social media sector is the most recent focus of the market with Facebook (NASDAQ:FB) being the crown jewel and the most expected IPO of the year.

Social media is recent but we must distinguish those companies that had their IPO last year [LinkedIn (NYSE:LNKD), Zynga (NASDAQ:ZNGA), Groupon (NASDAQ:GRPN) and Yelp (NYSE:YELP)] and those that have been in the market for more than 10 years [Quepasa (QPSA), Geeknet (NASDAQ:GKNT), Sina (NASDAQ:SINA) and Google (NASDAQ:GOOG)]. In the next analysis I will exclude Google because of its diversity in terms of activity, even so it will be present in the table of companies' financial data due to its importance to the sector.

Looking at fundamentals, generally companies in this sector have a debt ratio bellow 30% with Groupon being the only exception with a ratio around 60%. Comparing the price to their book value we observe that all of these companies are trading well above the respective book value, with Linkedin, Groupon and Yelp on the top.

In terms of main activity we should distinguish between those companies with negative EBITDA Margins and the others that actual make money. Zynga, Groupon, Yelp and Quepasa have negative EBITDA Margins and are also the same companies that had the biggest increase on sales last year (Zynga 336%; Groupon 97722%; Yelp 90%; Quepasa 660%) representing a strategy based on growth disregarding short term profitability, which can be assumed that they pretend to first stabilize sales at a higher level and just later cut the costs in order to achieve positive net income in the longer term. Even with this being clearly a risky growth strategy, we must take into consideration that their main activity can easily be replaced by new competitors, remember how fast hi5.com was replaced by Facebook.

Facebook

LinkedIn

Zynga

Groupon

Yelp

Quepasa

Geeknet

Sina

Google

Values in Millions

FB US EQUITY

LNKD US EQUITY

ZNGA US EQUITY

GRPN US EQUITY

YELP US EQUITY

QPSA US EQUITY

GKNT US EQUITY

SINA US EQUITY

GOOG US EQUITY

TOTAL LIABILITIES *

1.432

249

767

1.073

13

16

13

329

14.429

TOTAL ASSETS *

6.331

874

2.517

1.774

44

107

64

1.391

72.574

DEBT RATIO *

22,62%

28,47%

30,48%

60,49%

29,06%

15,13%

20,70%

23,65%

19,88%

LAST 12 MONTHS

SALES **

3.711

617

1.218

1.610

94

12

122

483

39.975

OPERATING INCOME **

1.756

35

- 527

- 238

- 23

- 10

- 1

35

12.835

NET INCOME **

668

15

- 506

- 279

- 24

- 13

- 1

- 302

10.829

EBITDA MARGIN **

56,02%

13,20%

-27,21%

-12,78%

-14,33%

-65,08%

0,50%

11,79%

35,86%

SALES 3YEARS AVERAGE GROWTH **

142,57%

89,89%

336,16%

97722,30%

90,68%

660,77%

29,69%

9,74%

20,59%

MARKET CAP ***

N/A

11.593

5.860

6.377

1.232

137

86

3.612

200.557

PRICE ***

N/A

112,44

7,96

9,92

20,23

3,76

13,34

54,84

615,65

PER ***

N/A

941,67

N/A

N/A

N/A

N/A

N/A

N/A

18,66

IPO PRICE

35,00

45,00

10,00

20,00

15,00

12,00

30,00

17,00

85,00

CHANCE SINCE IPO ***

N/A

149,87%

-20,40%

-50,40%

34,87%

-68,67%

-55,53%

222,56%

624,29%

BOOK VALUE ***

2,45

6,37

2,42

1,09

2,30

2,51

7,82

15,96

189,36

BUY RECOMENDATION ***

100%

52%

48%

28%

20%

50%

100%

57%

86%

SELL RECOMENDATION ***

0%

4%

13%

20%

0%

50%

0%

7%

0%

HOLD RECOMENDATION ***

0%

44%

39%

52%

80%

0%

0%

36%

14%

Click to enlarge

Source: Bloomberg

* Last Fiscal Year

** Last 12 Months

*** Values at 10-05-2012 20:34 (GMT)


(Click to enlarge)

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.