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Morningstar's Take on the Facebook IPO

We take a deep dive into one of the most anticipated offerings in years.

Morningstar.com, 05/18/2012

Facebook's debut has unsurprisingly been one of the most talked about tech IPOs in years. The sheer size of the offering, the ubiquity of its service, and the lack of growth elsewhere in the market has led to a very high level of interest from investors of all stripes. But is this excitement warranted?

To find out, we've cut through the hype and taken a deep dive into the company's fundamentals and its competitive advantages. The bottom line for investors, according to Morningstar's Rick Summer, is that Facebook is a wonderful wide-moat business. But a choppy growth trajectory will likely send shares lower at some point providing investors an entry point at a much more attractive valuation.

Complete Coverage of the Facebook IPO on Morningstar.com

Facebook a Future Advertising Force
Morningstar's Rick Summer sees Facebook and Google dominating the Internet advertising market as Facebook finds better ways to monetize its massive user base. (Video)

Facebook Poised for Massive Revenue, Cash Flow Growth
Facebook's trove of data on its users is its ace in the hole as it races to develop new revenue streams.

How Facebook Dug Its Wide Moat
Facebook has a wide economic moat based on its 'social graph,' communications layer, and competitively advantaged platform for brands, application developers, and advertisers.

Full Facebook Analyst Report
Facebook has a bright future, but revenue growth and profits may stumble in the near term.

First Day Pop Doesn't Spell Long-Term Success for IPOs
Recent tech IPOs have had great first days, but performance has lagged since then, says Morningstar's James Krapfel. (Video)

Previous Coverage

How Facebook Will Sneak Into Your ETFs
Facebook will be added to the holdings of several of these exchange-traded funds soon. Other funds, however, won't be graced with the presence of the social-networking giant for weeks--or months--to come.

4 Things Not to 'Like' About the Facebook IPO
Facebook has a solid business right now, but keep these weaknesses in mind before getting too excited.

Facebook's $100 Billion Valuation May Not Be Heroic
It will be a volatile ride, but Facebook's strong competitive advantages and growth opportunities could be the recipe for a hefty valuation, says Morningstar's Rick Summer.

Investing in Facebook: An IPO for Fools?
Investing in the Facebook IPO might not get you the returns you are looking for in the long run.

Huge Facebook IPO, Small Impact on Funds
Facebook's IPO will be huge for company insiders and early investors, but it probably won't be as much a boon for mutual fund investors.

Nygren: Taking a Pass on Facebook
There are plenty of other more attractively priced businesses in the market right now, says Oakmark's Bill Nygren.

Morningstar.com offers coverage of more than 1,700 stocks, 1,700 mutual funds, and 300 ETFs, plus market news, economic analysis, portfolio-planning insights, and investment commentary.
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