Facebook CEO Mark Zuckerberg walks through Facebook headquarters prior to unveiling the company's new location services feature called "Places" at a news conference in Palo Alto, California, on Aug. 18, 2010.
We doubt this is Mark Zuckerberg's goal in life, but if he wanted to be the richest man in the world, Facebook's stock has to go to $200. We got that number from Bloomberg wealth reporter David de Jong on Twitter. He says at $200 Zuckerberg would overtake Bill Gates as the world's richest person — assuming all things stay the same as they are now. (De Jong was responding to a tweet from NYT columnist Farhad Manjoo.)
Facebook's stock was trading at $76.20 on Wednesday morning, so it needed to almost triple. Facebook's current market cap is $195.4 billion. If the stock went to $200, Facebook would be worth over $500 billion. For some comparison, Apple is currently valued at $580 billion.
Could Facebook do it? Can it reach $500+ billion?
When Apple broke through the $500 billion barrier, it was doing ~$33 billion in annual profit, which was a 15X price-to-earnings ratio. That's roughly in line with the market as a whole over time. Price to earnings (P/E) is approximately how much an investor has to pay for $1 of earnings. It's a way to compare the value of stocks to one another.
However, the better comparison for Facebook might be Google, which is a software/internet company. Apple is viewed as a hardware company, so it has a tougher P/E ratio. With a $401 billion market cap, Google has a P/E of 31, and earnings of ~$13 billion.
Facebook currently has a P/E of 98, and its trailing 12-month profits are $1.91 billion.
If we use Google as a comparison, and Facebook's P/E eventually contracts to 31, then net income has to reach ~$16.1 billion, an ~8X increase from where it's at today. If we use Apple/the market, then Facebook has to get its net income to $33 billion, which is 16X where it's at today.
Could Facebook get there? Certainly!
Facebook has only scratched the surface of its potential. The core business'revenue is still growing at 61% on a year-over-year basis. It's sitting on Instagram, which could be another advertising juggernaut, and then there's WhatsApp and Facebook messages. Plus there's Oculus, and who knows what else Facebook can think of?
So, while it may not be his goal in life, Mark Zuckerberg can very conceivably become the richest man in the world.
Authored by JAY YAROW via businessinsider.com.