If you need a caption to tell you who this guy is, you're just weird. (Photo credit: Wikipedia)
What do Oracle and Salesforce.com know about Facebook that the rest of us don't? Whatever it is, it induced them to spend a combined $1 billion to acquire companies whose businesses are intimately linked to the continuing health of the social networking behemoth.
In a note to investors Monday, Needham & Co. analyst Laura Martin rates Facebook a buy with a target price of $40 -- more than 40% above where it opened the week. Martin cites Salesforce's $689 million purchase of Buddy Media and Oracle's acquisitions of Vitrue (for a reported $300 million) and Collective Intellect to support her recommendation.
"These commitments of new money to the social space, of which FB is the anchor tenant, imply that well-regarded public companies are valuing FB more robustly than investors are valuing FB," she writes. "Without a vibrant FB platform, these investments will be worth zero."
In fact, says Martin, Salesforce was willing to pay a higher multiple to buy Buddy Media -- 14 times its forward-year revenue -- than the one implied by Facebook's current market cap of $59 billion, which comes out to about 10 times forward-year revenue.
Other factors suggesting a brighter future for Facebook than the market currently expects, according to Martin, are a new study from comScore saying that paid Facebook ads do have an effect on consumer purchases, contra GM's beliefs on the matter, and the female-leaning composition of its audience, women being both more avid Facebook users and more heavily involved in household spending decisions.
Of course, if you're looking for a reason to be skeptical, there's the fact that Facebook's audience growth slowed to 5% in April from 89% two years ago.
