The calculations below outline how an intrinsic value for Facebook is arrived at by discounting future cash flows to their present value. We use analyst's estimates of cash flows going forward 5 years.
See our documentation to learn about this calculation.
|Levered FCF (USD, Millions)||$12,714.72||$16,652.72||$20,095.74||$23,874.86||$27,740.33|
|Source||Analyst x14||Analyst x16||Analyst x7||Analyst x5||Analyst x4|
Discounted (@ 11%)
Present value of next 5 years cash flows:
Terminal Value = FCF2021 × (1 + g) ÷ (Discount Rate – g)
Terminal Value = $27,740 × (1 + 2.5%) ÷ (11% – 2.5%)
Terminal value based on the Perpetuity Method where growth (g) = 2.5%:
Present value of terminal value:
Equity Value (Total value) = Present value of next 5 years cash flows + terminal value
Value = Total value / Shares Outstanding ($269,708 / 2,869)
Value per share:
Current discount (share price of $136.41): -45%
The discount rate, or required rate of return, is estimated by calculating the Cost of Equity.
Discount rate = Cost of Equity = Risk Free Rate + (Levered Beta * Equity Risk Premium)
Discount rate = 11% = 2.47% + (1.132 * 7.53%)
The Levered Beta is the Unlevered Beta adjusted for financial leverage. It is limited to 0.8 to 2.0 (practical range for a stable firm).
Levered Beta = Unlevered beta (1 + (1- tax rate) (Debt/Equity))
1.132 = 1.132 (1 + (1- 30%) (0%))
Levered Beta used in calculation = 1.132
Are Facebook's annual earnings growth expected to exceed 3.6% over the next 3 years?
Mr. Mark Zuckerberg founded Facebook, Inc. in 2004 and has been its Chief Executive Officer since July 2004 and Chairman since January 2012. Mr. Zuckerberg is responsible for setting the overall direction and product strategy of Facebook. He leads the design of Facebook's service and development of its core technology and infrastructure. Mr. Zuckerberg is also a Co-Founder of Breakthrough Energy Coalition, which he co-founded in November 2015. He has been a Director of Facebook, Inc. since July 2004. He attended Harvard University.
Average tenure of the Facebook management team:
Average tenure of the Facebook board of directors:
Facebook, Inc. provides various products to connect and share through mobile devices, personal computers, and other surfaces worldwide. Its solutions include Facebook Website and mobile application that enables people to connect, share, discover, and communicate each other on mobile devices and personal computers; Instagram, a mobile application that enables people to take photos or videos, customize them with filter effects, and share them with friends and followers in a photo feed or send them directly to friends; Messenger, a messaging application to communicate with people and businesses across platforms and devices; and WhatsApp Messenger, a mobile messaging application. The company also offers Oculus virtual reality technology and content platform, which allow people to enter an immersive and interactive environment to play games, consume content, and connect with others. As of December 31, 2016, it had approximately 1.23 billion daily active users. Facebook, Inc. was founded in 2004 and is headquartered in Menlo Park, California.
|Market Cap:||$391,419 million|
1601 Willow Road, Menlo Park, 94025, United States
|Industry:||Internet Software and Services|
|Sector:||Software and Services|