How Growing ARPU From Asia Can Impact Facebook’s Valuation

Facebook’s (NASDAQ:FB) advertising revenues form a majority of the company’s revenues. While its ARPU from North America grew to about $81.50 in 2017, the company’s ARPU from Asia is just around 10% that of the U.S. business at about $8.10. The primary reason for this disparity in ARPU is the comparatively low penetration of online ads in many Asian markets. Nevertheless, we project that the company’s ARPU from Asia will grow to over $9 in 2018 as advertisers shift their focus towards online ads. This leads us to believe that Asia will fuel the next leg of growth for Facebook’s revenues and valuation. We have created an interactive dashboard that illustrates how growth in ARPU across Asia will impact Facebook’s earnings and valuation. You can modify assumptions such as ARPU, monthly active users (MAUs), and margins to see how the company’s earnings and value change.

We currently have a $165 price estimate for Facebook, which is below the current market price.

Our analysis estimates that for every 5% increase in the projected ARPU from Asia, Facebook’s valuation can improve by 100 basis points, or around $1.80 per share. Considering the gap between online ad penetration in North America and Asia, it is possible that Facebook’s ARPU for Asia can grow at a faster rate than we currently forecast. This would materially boost the company’s revenues, as well as valuation, in the future.

What’s behind Trefis? See How it’s Powering New Collaboration and What-Ifs

For CFOs and Finance Teams | Product, R&D, and Marketing Teams

More Trefis Research

Like our charts? Explore example interactive dashboards and create your own