On the surface, Facebook is one of the most successful commercial propositions in the history of business. Its market capitalisation is today over half a trillion dollars. Shares are six times more valuable today than five years ago. Though they trade at a lower price to its forward earnings multiple than at any time since Facebook went public, in 2012, the overall picture is one of astonishing growth and wealth.
As the unmissable Miles Johnson wrote in the Financial Times yesterday: “The social network… is increasing revenues at more than 50 per cent a quarter and earnings per share at more than 70 per cent, making its profitability and growth light-years ahead of the average US-listed company”.
That analysis comes in an article which suggests that, for now, Facebook is “valued at a discount to the wider market despite giddy growth”. As short-term advice for investors, this strikes me as correct.
Yet the medium and longer-term picture look very different. In fact, Facebook is accumulating enemies and challenges at such a rate that its horizons have suddenly become somewhat clouded.