Shares of Google and Apple are probably better long-term bets than Facebook, and investors would do well to skip its highly touted IPO, Barron's wrote in its May 14 edition.
Facebook shares, if priced at $35, would be at a discount from a recent high of $44 in private trading on SharesPost in late March so could get a pop on the first day of public trading, the financial weekly wrote. The stock may be in the high $30s after the dust clears.
"Facebook is one of the greatest companies of our time, but it doesn't necessarily mean that it will be one of the greatest stocks," Dan Niles, senior portfolio manager at AlphaOne Capital Partners, told Barron's.
At $35, Facebook shares could be discounting $15 billion in annual ad revenues in a few years and $1.50 to $2 a share in profits. A doubling in Facebook's market value may require $30 billion or more of revenue by 2017, five to six times what the company is expected to generate this year. These revenues could produce $3 a share in earnings power and support a $70 stock, according to Barron's.
The company is seeking to raise about $10.6 billion by selling more than 337 million shares at $28 to $35 a share, which would value Facebook at $77 billion to $96 billion. Trading is expected on May 18.
Better bets probably are Apple and Google, proven growth companies with much lower valuations and cash-laden balance sheets, Barron's wrote. "Connect your friends on Facebook. Stay away from the stock."