Speaking exclusively to Benzinga, Lemelson Capital Management’s Chief Investment Officer, Emmanuel Lemelson, provided some insight on the negative sentiment from Facebook Inc FB users and the current stock price, which “hardly represents any sort of value,” he stated.
Lemelson said “it is extremely difficult to justify the current price of Facebook (about $215 billion) based on its financial showing -- TTM levered free cash flow of just $3.34 billion and $2.75 billion of Net Income.
"Further, the assets buttressing the issue offer very little margin of safety to the common equity holder (i.e. NCAV value of just $5.05 per share and tangible book of just $6.64 per share)," he added.
Taking a closer look at valuation, the hedge fund manager points out the Price-to-tangible-book ratio of 11.4x, Price-to-earnings of 73x, and price to Free Cash Flow of “a whopping 61x.”
“I don’t know what the earnings might be, because I don’t really follow the issue. However, I have noticed that overwhelmingly FB users (unlike Apple Inc. AAPL users) have increasingly negative feelings about using the product.
"And many ultimately defect, commenting how much better they feel once they do,” he said.
Lemelson concluded with the question: “How could such an emotive phenomenon amongst users ever lead to positive long-term economics?”
Javier Hasse and Brianna Valleskey contributed to this report.
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