Facebook Is Worth More Than $19 a Share

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If Facebook's (Nasdaq: FB  ) uninspiring quarterly report last week wasn't enough to sour the market on the leading social-networking website operator, maybe the wave of pessimistic analysts will do the trick.

Bernstein Research Carlos Kirjner is out with an unflattering upgrade of Facebook today. The Bernstein bear upgraded the stock from "underperform" to "market perform," but that's essentially a neutral rating. Given the sharp drop in the stock since its May IPO at $38, Kirjner is lowering his price target from $25 to $23, while suggesting that the company may be worth just $19 a stub right now.

The $19 price is based on adding Facebook's bountiful cash balance to 10 times his estimates for the company's 2014 EBITDA. The bump from $19 today to his $23 price target in the future is based on the upside potential of catalysts beyond the company's current display-advertising stronghold. Along the way, he's also worried about what will happen in the coming months as lockup expirations expire and Facebook's float gets fatter.

There is no shortage of reasons to be bearish here, but that's also Facebook's biggest advantage right now. Folks are under the impression that Facebook only generates revenue on ad clicks, perhaps unaware of the Sponsored Stories goldmine that's generating roughly $1 million a day in revenue at this point.

At a time when worrywarts are concerned about Facebook's sluggish performance in Europe and about General Motors' (NYSE: GM  ) decision two months ago to publicly bolt as an advertiser, Facebook is growing in both its membership base and its stickiness. At a time when Google (Nasdaq: GOOG  ) is dealing with advertisers who pay less per click, Facebook's 28% spike in revenue was the combination of an 18% spike in ads and a 9% boost in sponsor payments per ad.

Was Facebook overvalued when it went public at a lofty $104 billion market cap? Absolutely. Is pegging Facebook's value at $19 -- coincidentally half of May's $38 IPO price -- now overdone on the bearish end of the spectrum? Probably.

As Facebook continues to get smarter and drum up new ways to monetize its magnetism and growing knowledge of its users, you don't want to be on the side that's betting against this busted IPO.

A world of opportunity
Burned by the Facebook IPO? Make sure you understand the Facebook story inside and out in our latest premium research report on the social network. Not only will you learn about the key opportunities and threats facing the company, but you'll also get a full year of updates to go with it. Learn more.

The Motley Fool owns shares of Facebook and Google. Motley Fool newsletter services have recommended buying shares of Facebook, Google, and General Motors. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.

Longtime Fool contributor Rick Munarriz calls them as he sees them. He owns no shares in any of the stocks in this story and is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Motley Fool has a disclosure policy.

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