Facebook CEO Mark Zuckerberg's visit to China stirred interest that the co-founder of the social networking site intends to bring the website to China. Although Zuckerberg met with Robin Li, CEO of Baidu (Nasdaq:BIDU), a spokesman for Baidu tried to dampen the speculation.

IN PICTURES: 5 Tips To Reading The Balance Sheet

A Short History of Trouble
Most westerners are aware of Google's (Nasdaq:GOOG) foray into China, which was met with censorship and attempts at control. Google originally cooperated with the Chinese government on censorship issues, then refused to go along with it, eventually leaving China. Not as many are aware that Facebook was available in China up until mid-2009.The issue? Censorship, or the Chinese government's aversion to what it considers politically sensitive material. Thus it has banned not only Facebook, but Twitter and YouTube.

Is Facebook Stock Already a Bubble?
Mark Zuckerberg was named Time Magazine's Person of the Year for 2010. Facebook, which is the hottest social networking sites, has private stock, so shares aren't available on the open market. It may go public, perhaps in 2012, but it currently does not publicly report revenue or earnings. Shares are available through Second Market and other avenues, and there has been brisk investor interest.

While the stock trades currently at 25 times its anonymously reported revenue of $2 billion not estimated earnings, shares selling for $25 give Facebook an implied valuation of more than $50 billion. For some context, mediocre Yahoo (Nasdaq:YHOO) is currently valued at $21 billion, while dominant Amazon's (Nasdaq:AMZN) market cap is $82 billion.To guess at the PE of a private company like Facebook, a multiple of 200 to 400 times estimated earnings has been put forth as a reasonable guess, but earnings are not publicly known. Even castigated Neftlix (Nasdaq:NFLX), which looks overvalued by internet/tech stock standards, trades at "only" 67 times earnings.

From Social Phenomenon to Social Importance
Perhaps the comparison of relative value or the earnings and revenue guesstimates might be considered irrelevant to those who've bought or who are lining up to buy Facebook private stock. We're not talking about day traders or tech-heads or those who think Facebook is Woodstock for the 21st century, or people who've simply heard of Facebook as a new fad from their kids or grandkids. No, serious money - hedge funds and private money managers are lined up to get in on the action. Private shares have rapidly jumped in price already, so those who want in become more nervous every minute they're not. (For related reading, see Alternative Ways To Invest In Facebook).

A Serious Site
Mark Zuckerberg apparently has serious cultural interest in China, as well as reported interest in hooking up Facebook there again. He was quoted as saying, "How can you connect the whole world if you leave out 1.6 billion people?" Kaiser Kuo, international communications director for Baidu, tried to squelch rumors of Facebook's imminent entry into China, but remarked that even if Facebook re-entered China with restrictions, it would still be positive for Chinese internet users.

The Bottom Line
The new Great Wall of China, the one that blocks internet sites that have content the government doesn't like, may have a hard go in the new global millennium. In what may be a related item or not, China's father of this internet wall, Fang Binxing, was temporarily hounded off his blog by hundreds of angry comments from protesters.

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

Related Articles
  1. Investing

    The ABCs of Bond ETF Distributions

    How do bond exchange traded fund (ETF) distributions work? It’s a question I get a lot. First, let’s explain what we mean by distributions.
  2. Stock Analysis

    3 Stocks that Are Top Bets for Retirement

    These three stocks are resilient, fundamentally sound and also pay generous dividends.
  3. Investing News

    Are Stocks Cheap Now? Nope. And Here's Why

    Are stocks cheap right now? Be wary of those who are telling you what you want to hear. Here's why.
  4. Investing News

    4 Value Stocks Worth Your Immediate Attention

    Here are four stocks that offer good value and will likely outperform the majority of stocks throughout the broader market over the next several years.
  5. Investing News

    These 3 High-Quality Stocks Are Dividend Royalty

    Here are three resilient, dividend-paying companies that may mitigate some worry in an uncertain investing environment.
  6. Stock Analysis

    An Auto Stock Alternative to Ford and GM

    If you're not sure where Ford and General Motors are going, you might want to look at this auto investment option instead.
  7. Mutual Funds & ETFs

    The 4 Best Buy-and-Hold ETFs

    Explore detailed analyses of the top buy-and-hold exchange traded funds, and learn about their characteristics, statistics and suitability.
  8. Mutual Funds & ETFs

    What Exactly Are Arbitrage Mutual Funds?

    Learn about arbitrage funds and how this type of investment generates profits by taking advantage of price differentials between the cash and futures markets.
  9. Investing News

    Ferrari’s IPO: Ready to Roll or Poor Timing?

    Will Ferrari's shares move fast off the line only to sputter later?
  10. Stock Analysis

    5 Cheap Dividend Stocks for a Bear Market

    Here are five stocks that pay safe dividends and should be at least somewhat resilient to a bear market.
  1. How do dividends affect retained earnings?

    When a company issues a cash dividend to its shareholders, the retained earnings listed on the balance sheet are reduced ... Read Full Answer >>
  2. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
  3. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
  4. What types of capital are not considered share capital?

    The money a business uses to fund operations or growth is called capital, and there are a number of capital sources available. ... Read Full Answer >>
  5. How does additional paid in capital affect retained earnings?

    Both additional paid-in capital and retained earnings are entries under the shareholders' equity section of a company's balance ... Read Full Answer >>
  6. What is the difference between issued share capital and subscribed share capital?

    The difference between subscribed share capital and issued share capital is the former relates to the amount of stock for ... Read Full Answer >>

You May Also Like

Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!