By significantly increasing its valuation for Facebook Inc (NASDAQ:FB)‘s picture sharing platform, Citigroup Inc (NYSE:C) has turned Facebook into an attractive investment opportunity, given the levels that the stock is currently trading on.
On CNBC, Mark May, Citigroup Inc (NYSE:C)’s analyst shed some light on why Facebook Inc (NASDAQ:FB)’s platform was now worth $35 billion as compared to the $19 billion valuation that it had achieved before.
“[…]The way we look at valuation for companies like this is looking at what their potential is and trying to discount that based on different risk factors, and that is kind of the exercise that we have done here […],” said May.
This potential meant that the valuation was based on full monetization of Instagram, something that Facebook Inc (NASDAQ:FB) has not yet achieved. However, there are still a couple of factors going for Citigroup Inc (NYSE:C)’s analyst, which add weight to his new valuation.
“[…] Instagram is performing incredibly well from a users stand point, user engagement is incredibly high. We think that twice that of a typical Twitter user and we also now have a lot of benchmarks for how these social media properties are monetizing and it’s working. Advertising is working on sites like Twitter and Facebook Inc (NASDAQ:FB) […],” explained May.
Back in 2012 some people thought that Mark Zuckerberg overpayed for Instagram when he dished out a billion dollars to get the platform under Facebook Inc (NASDAQ:FB)’s umbrella. I think that a return of $35 billion on $1 billion in two years should help those critics take another look at the steadily growing online advertisement industry.
Facebook Inc (NASDAQ:FB) was up about 1.8 percent for the day, when the closing bell rang. The stock is up nearly 48% year to date.
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