Tech Valuation Roundup, 2013: Facebook, Ebay, Spotify, FourSquare, Zynga, Infosys—Overvalued; Still: Google Holds Its Own

Posted date: January 16, 2013 In: QuickPress, Valuation/Appraisal

Investors Cool on Tech

A survey of tech firms’ valuations shows many companies are challenged. Here’s detail from various reporters:

eBay At 8-Year Highs Ahead Of 4Q Numbers, Valuation A Concern [1/15/2013]

Bremdam Gilmartin reports Monday [1/13/2013] that eBay (EBAY) is scheduled to report 4Q 2012 earnings after the closing bell on Wednesday, January 16. The numbers are typically released at 4:15 p.m. EST and will be followed with a conference call at 5:00 p.m. eBay is expected to deliver solid results for the recent 4Q on strength in the PayPal and Marketplaces segments.

Outliers and Strategy

Back in October, eBay gave the following guidance for 4Q 2012:

Non-GAAP Earnings Per Share in the range of $0.66 to $0.69. The Street estimate is $0.69. (Source: Yahoo Finance)
Revenues are forecast in the range of $3.85 billion to $4.00 billion. The consensus is $3.97 bln.

With 4Q 2012 results potentially priced in, much of the focus will center on the outlook for 1Q 2013.

The current consensus for Non-GAAP EPS for the 4Q 2012 period is $0.63.
The consensus for Revenues in the 1Q 2013 period is $3.79 bln.

Any adjustments to the outlook for FY2012 could also have consequences for eBay shares. Back in October, eBay said it expects net revenues in the range of $13.95 bln to $14.1 bln with non-GAAP earnings per diluted share in the range of $2.32 – $2.35.

eBay is seen posting solid results for 4Q 2012, thanks to ongoing strength in the PayPal business and its expanding leadership position in global payments, along with a pickup in the Marketplace segment.

eBay recently hit a 52-week high of $54.20 and is up more than 25% since late summer. Following the advance, eBay is now trading at 5.2x sales and 20.5x cash flow, well above the 5-year averages (3.6x & 15.1x, respectively), implying the bar is set pretty high ahead of 4Q earnings.

A few weeks ago, Spencer B. Ante, at the Wall Street Journal, reports:

Investors Cool on Foursquare

Facebook’s IPO, Flattening Valuations Put Hurdles Before Social Media Startups

Some social media startups are finding investors a lot less friendly in the wake of Facebook Inc.’s FB -2.74% messy initial public offering.

Foursquare is having troubles convincing investors that its valuation shouldn’t shrink, a sign of a cooling toward social media startups in the wake of Facebook’s messy initial public offering. Spencer Ante reports on digits. A few months before Facebook went public in May, venture capital firm Spark Capital Partners LLC bought $30 million of Foursquare Labs Inc. stock from the startup’s employees in a deal that valued the four-year-old company at $760 million, people familiar with the matter said.

Now, Foursquare is having a hard time convincing investors that it is worth that much money as it looks to raise around $50 million, people familiar with the discussions said.

Potential investors aren’t convinced the company is moving quickly enough to make money and are concerned that the use of its free service—which helps people find and alert others to their presence at places like bars and restaurants—is starting to slow, the people said.

On a more positive note, c:Net reported two months ago that

Spotify reportedly near financing round for a $3B valuation

The music-streaming service has almost finalized a fresh round of financing at $100 million, sources tell The Wall Street Journal.

Spotify is close to closing a $100 million financing round that would value the company at a little more than $3 billion, sources tell The Wall Street Journal.

The capital would come from multiple investors, including Goldman Sachs, although the Journal did not identify who the other investors were.

CNET has contacted Spotify for comment and will update this report when we learn more.

In a funding round last year, the music-streaming service raised about $100 million from venture capital firm Kleiner Perkins Caufield & Byers and Russian investment firm DST Global, to give it a $1 billion valuation. More cautious now like many Internet startups, the company has pulled back on its ambitious valuation target of $4 billion.

George Leong at Wall Street Pit asserts:

Facebook’s (FB) Hot, But Valuation’s Questionable

Says George Leong, on 1/15/2013. “I’m not sure if you’ve noticed, but Facebook, Inc. (NASDAQ:FB) is steadily edging higher on its chart and just flew above the $30.00 level last Wednesday, with nearly 105 million shares traded, the highest daily volume since November 16, 2012. There is clearly some market interest returning to Facebook since the stock plummeted to $17.55 on September 4, 2012. The stock price is still far away from its $45.00 high on its May 18, 2012 initial public offering (IPO) day, but the upward momentum and volume make Facebook an intriguing stock at this time.

Driving up the current buying is news that Facebook is set to launch another new product or service this week that will likely include new services to generate much-needed revenue growth. The company has launched its mobile advertising model that could drive profits.

What Facebook has in its favor is its massive user base of a billion subscribers. This is significant, and if the company can monetize this asset, the stock could continue to drive higher.

The stock chart below shows the nice, steady rally in Facebook since the stock broke above its 50-day moving average (MA) in mid-November 2012, with higher highs and lower lows. We may be witnessing a bullish cup-and-handle formation.

Facebook May Face Trouble

Fast Company’s David Llorens argues: “Plus-One This: Proof That Google Plus Will Prevail”:

Google Plus has been written off as a universal flop–but a deeper look proves that we will all eventually succumb to its siren song. Remember when Google Plus “flopped”? Well, it didn’t. In fact, it was, and still is, just part of Google’s plan–but everyone (including the media) has trouble seeing it as anything other than a swing and a miss for the explosive overtaking of Facebook, which is what most people believe was Google’s intention with Google Plus. Sure, I bet Google hoped in the back of its mind it would get lucky and eclipse Facebook, but Google certainly wasn’t counting on it.

99% of the people in Silicon Valley I’ve talked to about this, including some very, very bright folks with quite a bit of money and clout, will tell you that Google Plus flopped. They have, in their own minds, written it off entirely. The remaining 1%, while willing to consider that it didn’t flop, are still so tepid that they refuse to stake any credibility on saying it will be successful (which I would measure as having the same level/range of active users as the other big social networks like Facebook, Twitter, LinkedIn, etc.). Articles written by that 1%, like this one, are all chock-full of “mights” and “maybes.”

But I’m willing to stake my reputation on the following statement: If Google Plus doesn’t have a staggering number of active users by the end of 2013, you can all come over to my office and pie me in the face.

National Association of Certified Valuators and Analysts

The National Association of Certified Valuators and Analysts (NACVA) supports the users of business and intangible asset valuation services and financial forensic services, including damages determinations of all kinds and fraud detection and prevention, by training and certifying financial professionals in these disciplines.

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