Facebook (NASDAQ:FB) was three months ago 
a disaster for all investors who participated in the IPO last year. Compared to the price of the IPO, Facebook recorded in early July a loss of over a third. But, something happened this summer and Facebook managed to rise by over 100% in just three months, mainly due to exacerbated optimism fueled by forecasts of several banks, the who have participated in the company’s IPO in 2012.
The first impressive jump of the Facebook shares came on July 25, when the first financial results showed solid gains in mobile advertising, 42 % of total earnings. On that day Facebook shares jumped almost 30% from $26.51 to $34.36.
On August 2, Facebook surpassed for the first time the IPO price of $38, reaching $38.05. After a quiet period and trading in that area, Facebook shares went over the threshold of $40 on August 23, when they closed at $40.55. The growth seemed to be too fast, almost two-thirds in less than two months.
Meanwhile all kinds of optimistic predictions started to come from analysts who amended their estimates as if they were blind just a few weeks before. And that was at a time when Facebook did not report anything unusual.
On September 11, Facebook manages to reach the $45 threshold. Meanwhile, analysts at Cowen & Co. radically improved their forecast of the target price for Facebook, from $29 to $53. Citi, one of the banks that brokered Facebook IPO follows suit with an hard to believe change in target price $32 to $55. Next was Goldman Sachs, another leading bank participating in the IPO, which on Friday (September 27) said that it increased the target price forecast for Facebook, from $52 to $58.
With such fuel injected in Facebook forecasts, shares surpassed the $50 threshold, closing Friday at a record level of $51.24. Compared to the price of the IPO, Facebook is now up by 35% thanks to an increase of 106.5% in the last three months. Facebook stock closed today at $50.23.
Market capitalization of the largest social network in the world is now at $122.23 billion. The astonishing growth that propelled the Facebook stock pushed its CEO and co-founder, Mark Zuckerberg, in the top 25 richest men in the world, with a fortune of $25 billion, just shy of rivals from Google, Larry Page and Sergey Brin, with $25.5 billion and $25.1 billion respectively.
A year ago, in September 2012, Zuckerberg was not even among the top 100 richest people on earth, as the Facebook shares reached a minimum of $17.7. Compared to a year ago, Zuckerberg ‘s wealth has increased almost three times.
It remains to be seen if Facebook will bring satisfactory returns for shareholders, given that now it trades at a 232-fold its gains in the last 12 months.
Analysts expect Facebook to increase its revenue by 44% this year and by 32% next year. Facebook is now trading at about 54 times next year’s earnings.
Despite these crazy numbers, Facebook is not the most expensive company in the field. The most inflated share price belongs to LinkedIn, which is traded at 938-fold its earnings in the past 12 months and about 112 times its earnings predicted for the next year.
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