Discounted cash flow valuation of facebook inc.

Abstract

This thematic paper demonstrated how to value the stock price specifically Facebook INC. (FB) in which the framework of discounted cash flow to firm (DCFF) are applied. The process starts with creating a forecast, calculating a reasonable valuation and recommending to buy/hold/sell the company stock. FB is to give people the power to share and make the world more open and connected. Also, FB builds useful and engaging products that enable people to connect and share through mobile devices, personal computers, and other surfaces. FB is unique in term of its peer’s valuation as there are unique and kind of helping people to connect around the world. Thus, FB is valued in comparison with other peers such as Google (GOOG) and Twitter (TWTR) which are quite similar in business model and industry. The result from this paper illustrates the fair value of FB share price which is expected to be valued higher than the current share price as of DEC 2017 by 44%. The result obtained has the recommendation of “BUY” as the current share price is still undervalued.