Investing

Should Facebook Already Be Worth More Than Wal-Mart?

Comparing companies by market cap does not always provide a clear picture, but it should offer at least some scope of market perception by investors versus real world finances behind a company.

So, what are investors supposed to make of it when they see that Facebook Inc. (NASDAQ: FB) has passed Wal-Mart Stores Inc. (NYSE: WMT) in total market capitalization?

Facebook’s late-Monday trading valued the company at $238 billion, versus $234.5 billion for Wal-Mart. Wal-Mart ranks currently as the 11th largest member of the S&P 500 Index, or it would have been tenth in order of market cap if you account for two classes of Google shares. Still, this is significant.

It turns out that going into the weekend, the year-to-date performance of Wal-Mart was -14.25%. Facebook’s performance in 2015 had been a gain of 5.75%. Still, going back a year, the numbers were far more exaggerated: Facebook was up over 28% versus almost a 2% drop in Wal-Mart.

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Seeing moves like this often make investors scratch their heads. Is it better to occupy everyone’s free time as your business or to sell them all the things they need for their lives? It is not an easy question to answer, but here are some basis statistics and figures on each:

  • Total headcount: roughly 10,000 at Facebook versus 2.2 million for Wal-Mart
  • 2014 revenue: $12.46 billion for Facebook versus $485 billion for Wal-Mart
  • 2014 operating income: $2.92 billion at Facebook versus $16.8 billion for Wal-Mart
  • Expected 2015 revenue: $17 billion at Facebook versus $488 billion for Wal-Mart
  • 2014 selling general and admin: $2.65 billion for Facebook versus $93.4 billion for Wal-Mart
  • 2014 income tax expense: $1.97 billion at Facebook versus $7.98 billion at Wal-Mart
  • 2015 P/E ratio: 42 at Facebook versus 15 for Wal-Mart
  • 2016 P/E ratio: 32 at Facebook versus 15 for Wal-Mart
  • Dividend yield: 0% at Facebook versus 2.7% at Wal-Mart

Investors simply cannot use many of the traditional metrics when comparing a super-high growth company like Facebook to a very established retail giant like Wal-Mart. Still, it is always interesting to see some of the most basic data compared to each other when this sort of price action is concerned.

The performance disparity here has investor expectations currently at similar levels on each stock. Facebook’s consensus analyst price target implies upside of just over 13% to the stock’s current price. That is versus a consensus target of $80.50 for Wal-Mart, implying upside of 10.6% on the surface, or an implied expected gain of over 13% as well if you include Wal-Mart’s dividend.

Sam Walton and Mark Zuckerberg were two very different people, but they have more in common than most people think — they both took over America. One took over retail, and one took over social media. Now the world’s leader in social media is worth more than the world’s largest retailer.

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