Very few companies will be happier to put 2012 behind them than Facebook Inc (NASDAQ:FB). Was it only a year ago that it was the most highly anticipated IPO of all time, with real-money trades in private markets putting a valuation of over $100 billion on the company? Even with a respectable rally in November Facebook is down about 32% from its IPO price and is currently valued at $56 billion. Concerns about privacy and changes to the site’s interface abound, though that’s nothing new. Recent attempts to monetize traffic either look like grasping at straws- $1 to send a message to a stranger, $7 to “promote” a status update- or have resulted in a black eye for the company as with its Instagram debacle. Considering that Facebook Inc (NASDAQ:FB) trades at 40 times forward earnings estimates, it needs strategies to grow its earnings and thus far we’re not that confident management is making progress there. See our coverage of Facebook, including a potential fee to send messages to non-friends and changes to Facebook Timeline.
Facebook Inc (NASDAQ:FB)’s revenue was up 32% last quarter compared to the third quarter of 2011, which was roughly the same growth rate that the company had experienced on the top line in the first half of the year. However, thanks in part to an increase in share-based compensation (notably in R&D, where expenses more than doubled from a year earlier), pretax income was about flat. We’ve mentioned the high earnings multiple; Facebook also looks expensive with an enterprise value equal to 10 times trailing revenue.
Facebook Inc (NASDAQ:FB) was one of the ten most popular tech stocks among hedge funds in the third quarter of 2012 (see the top ten rankings), and while we hadn’t considered the stock a buy at the time those managers likely caught the recent rally- though they may have ridden the stock down during the third quarter, of course. Tiger Global Management reported owning nearly 12 million shares of the stock (find Tiger Global's favorite stocks) while Viking Global, which is managed by fellow Tiger Cub Andreas Halvorsen, initiated a position of 4.2 million shares (check out Halvorsen's stock picks).