Reflecting on the Facebook IPO, Article Review Example

The global social networking company, Facebook, has had a slow and unpredictable drop in its stock pricing since its Initial Public Offering (IPO). The article analyses the company’s worth at the presents time and tries to predict any financial gain expected from the investment in the future. The objective metrics that the article advises investors to use entails a comparison of the major technology companies that have already had their IPO and are in current operation.

The essential data examined and compared in this case comprised of the sales, operating profit, the market value and the rate of research and design (R&D) practiced by the companies. All these factors have a direct effect on the value or stock price of a company. The IPO values compared date back the year 2012.

Facebook as an Internet Company which makes gives it a higher gross margin compared to other companies like Apple Inc. or LinkedIn. These Apple Inc. invests a lot in the development and production of new hardware gadgets. This means that the firm requires labor which requires additional operating costs therefore negatively affecting the marginal cost of production.

The LinkedIn firm, just like Facebook, is a social network that relies on small labor foundation, meaning it does not greatly spend on physical products or labor-intensive services. The one notable feature makes Facebook different from LinkedIn is that it heavily depends on advertising to earn revenues. Linked does not simply rely on adverts.

Even though the prospected growth rate for Facebook is established at a high of 88% since its IPO, the long term outcome is still unknown since the future is pegged on the end user behavior. Given the increasing rate of mobile user of the Facebook application has slowed down earning rates from advertisements as compared to desktop or PC users. This means that rate of growth for Facebook is speculative, since the pace and cost of progression keep on changing.

References

Cusumano, M. A. (2012). Reflecting on the Facebook IPO. Communications of the ACM, 55(10), 20-23.