Seeking Alpha

Bud Labitan's  Instablog

Bud Labitan
Send Message
I am an author of books related to the decision framing and optimizing processes of Buffett and Munger. These books are available at www.frips.com and: http://www.amazon.com/Bud-Labitan/e/B002D1ERT4 With integrity and patience, we can also earn superior profits by carefully evaluating facts and... More
My company:
Bud Labitan
My blog:
My book:
The Four Filters Invention of Warren Buffett and Charlie Munger
  • A Rough Estimation Of Facebook's Intrinsic Value 0 comments
    May 22, 2012 7:48 AM | about stocks: FB, BRK.A

    A Rough Estimation of Facebook's Intrinsic Value

    Does FB make for an intelligent investment or intelligent speculation today? Starting with a base estimate of annual Free Cash Flow at a value of approximately $950,000,000 and the number of shares outstanding at 2,140,000,000 shares; we used an assumed FCF annual growth of 15 percent for the first 10 years and assume zero growth from years 11 to 15. Review the Free Cash Flow record here:

    http://quicktake.morningstar.com/stocknet/CashFlowRatios10.aspx?Country=USA&Symbol=fb&stocktab=keyratio

    The resulting estimated intrinsic value per share (discounted back to the present) is approximately $11.14.

    Market Price = $34.03
    Intrinsic Value = $11.14 (estimated)

    I used a discount rate of 6.25% and the Moat appears to be narrow and shallow. The Moat can last as long as Google or Yahoo or Microsoft do not design a friendlier website. Once one of the big cloud providers designs a friendlier interface, the moat starts eroding.

    For example, if Google plus was easier to use, and it added features like a friendlier ebay style trading/barter/consulting it could take the lead. Thus far Google+ is too cumbersome and geeky to be useful. However, they are trying to make it better.

    Bud Labitan
    author of "The Four Filters Invention of Warren Buffett & Charlie Munger" and "Moats: The Competitive Advantages of Buffett & Munger Businesses"

    .

    Disclosure: I am long BRK.A, BRK.B.

    Themes: INTRINSIC VALUE, VALUATION Stocks: FB, BRK.A
Back To Bud Labitan's Instablog HomePage »

Instablogs are blogs which are instantly set up and networked within the Seeking Alpha community. Instablog posts are not selected, edited or screened by Seeking Alpha editors, in contrast to contributors' articles.

Comments (0)
Track new comments
Be the first to comment
Full index of posts »
Latest Followers

StockTalks

More »

Latest Comments


Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.