- CNBC's Joe Kernen asks why Facebook's market cap should dwarf the values of other major companies that make and sell real products.
- With the prospect of government regulation in the offing, Kernen reminds viewers that even the mighty can fall, using AOL as a cautionary tale.
- Stressing he's not saying Facebook will be like AOL, Kernen says only time will tell how it deals with its own problems.
Facebook shares may have taken a big hit as questions mount over how the social network treats user data, but the company still has a stock market value of over half a trillion dollars, more than Coca-Cola, PepsiCo and McDonald's combined.
On CNBC Tuesday morning, as Facebook stock remained under pressure in the premarket after Monday's nearly 6.8 percent decline, "Squawk Box" co-host Joe Kernen asked why Facebook's more than $500 million market capitalization should dwarf the values of other major companies that make and sell real products and more tangible services.
Admittedly, Kernen has always said he does not understand why people are on Facebook and he's not among 2 billion-plus monthly active users around the globe.
Kernen acknowledged the feat of Mark Zuckerberg building Facebook into a company that generates robust earnings and revenue growth by using the power of his massive user base to sell advertising. But with the prospect of government regulation in the offing, Kernen reminded viewers that even the mighty can fall.
Using AOL as an example, it was a darling of the 1990s internet boom, with a peak market cap of $222 billion at the end of 1999. But after its disastrous 2000 merger with Time Warner and a breakup nine years later, AOL was a shadow of its former self. It was purchased by Verizon in 2015.
Stressing he's not saying Facebook will be like AOL, Kernen said only time will tell how it deals with its own problems. Facebook's latest problems surfaced with allegations that Cambridge Analytica, which worked with Donald Trump's presidential election team, misused the data of 50 million Facebook users. That's on top of revelations that Russia used the platform to try to influence the 2016 election.
But currently, even after Monday's stock-price decline, Facebook's market cap is worth several multiples of other well-known companies.
Kernen also pointed out the entire defense group of General Dynamics, Lockheed Martin, Raytheon and United Technologies is not even close to a Facebook. "You still have a [nearly] a couple of hundred billion that you could buy Boeing. But you'd need an extra $20 billion," he said.