An analyst at of Bank of America Merrill Lynch, Google Inc (NASDAQ:GOOG)’s says YouTube is valued at around $70 billion, which is more than the market cap of Yahoo! Inc. (NASDAQ:YHOO), eBay Inc (NASDAQ:EBAY) or Netflix, Inc. (NASDAQ:NFLX). The video streaming site, boasts more than 1 billion active monthly users and was acquired by Google Inc (NASDAQ:GOOG) in 2006 for about $1.65 billion.
Merrill Lynch analyst Justin Post, in a note this week to clients, said that “YouTube is a big asset that warrants a big valuation.”
To put things in perspective, here are 3 of the better-known S&P 500 companies that currently carry lower valuations that YouTube:
Yahoo! Inc. (NASDAQ:YHOO)
Yahoo has a current market capitalization of $40.2 billion. For fiscal 2014, the company recorded $4.6 billion in revenue; about the same as YouTube made. The stock has risen 22 percent in the last 12 months, more than double the gains made in the S&P 500 index. But Yahoo! Inc. (NASDAQ:YHOO) was recently downgraded to “hold” from “buy” at Evercore Partners amidst growing concerns that its sizeable holdings in Alibaba might come under increased tax scrutiny.
eBay Inc (NASDAQ:EBAY)
eBay has a net valuation of $71.4 billion. The e-commerce company reported revenue of $4.5 billion in the just concluded quarter. Shares have risen close to 15 percent over the last one year. eBay Inc (NASDAQ:EBAY) is likely to spin-off its PayPal unit later this year, which some analysts believe is worth $50 billion.
Netflix, Inc. (NASDAQ:NFLX)
Netflix has a market cap of $37.3 billion; almost half of that of YouTube. The company has been steadily growing in the recent quarters, helped by more and more people switching from cable to video streaming. Shares of Netflix, Inc. (NASDAQ:NFLX) have soared 56 percent in the last 12 months, with much of that appreciation occurring in the last 3 months.
YouTube Still Has Some Steam Left
Justin Post said that YouTube accounts for about 20 percent of Google Inc (NASDAQ:GOOG)’s total market cap of $368 billion. The valuation was arrived at by using a 7-times-revenue multiple model. Furthermore, he expects growth to continue, with a possible valuation of as much as $90 billion. This year alone YouTube’s revenue is expected to grow 34 percent to $8 billion, with that figure likely to reach $13 billion by the end of fiscal year 2017.
YouTube is the foremost video site in the world. Data from comScore showed that users spend more time on YouTube than they do on Twitter and Instagram. And this raging success has lured thousands of companies to use it as a very powerful marketing tool. And Google Inc (NASDAQ:GOOG) in return, gets access to copious amounts of user data, which it can use at its convenience.