Yes, the social-media giant has been facing a slew of scandals this year. And, yes, its growth has slowed and its costs have gone up as CEO Mark Zuckerberg has tried to refocus the company on combatting fake news and other problems. But the precipitous drop in the company’s shares of late — Facebook’s shares are off 37% since hitting their all time-high in July — have made them the biggest bargain on the block, Mahaney says.
The 22% drop in Facebook’s shares just since the end of August has been among the steepest of all the large-cap internet stocks. Thanks to that decline, the ratio of the company’s enterprise value to its earnings before interest, taxes, depreciation, and amortization (EBITDA) is about 10. That’s at the low end of the four-year range for that ratio, Mahaney notes in the report.
Meanwhile, as of the close of trading Friday, the company’s stock was just 4% above its 52-week low.
That valuation seems way out of line with where Facebook is as a business in Mahaney’s eyes. If anything, Facebook has become more dominant than ever this year, since it owns four of the top social-networking and messaging services and is grabbing an ever-larger share of online advertising.
Even though many tech companies have been beat up lately, Facebook still “stands out,” says Mahaney, who has a $190 price target on the company’s stock. Facebook’s shares closed Monday at $136.38.
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