The Kazakh Analyst Who Wowed With Facebook Valuation

His day job was visiting mines for the companies he analyzed, but Yerlan Abdikarimov thought he'd do something a little bit different. He decided to value Facebook.

Now Abdikarimov, a 24-year-old Kazakh working for IFG Continent, an investment bank in Kazakhstan, has been called "the best analyst covering Facebook" by "Forbes" magazine.

When the U.S. social-networking giant Facebook -- which has more than 900 million users -- took its shares public in May, it seemed to be a lucrative and promising investment opportunity. However, critics are calling Facebook's widely anticipated initial public offering (IPO) one of the most overhyped in history.

On May 18, Facebook began trading shares with an initial price of $38 per share. While many experienced analysts on Wall Street predicted a price of up to $50 per share before the IPO, Abdikarimov put the price at $24.62.

Facebook stock is currently selling for $19.17 -- nearly half of its so-called offering price.

Although Abdikarimov's employer normally deals with assessments of Central Asian companies, some customers had asked for guidelines on the much-discussed Facebook IPO.

There was way too much Facebook hype, Abdikarimov told RFE/RL's Kazakh Service.

"The Facebook IPO hype taking place in the United States reached Kazakhstan, too, particularly in the wake of 'The Social Network' movie, the publication of a book on Facebook founder Mark Zuckerberg, and extensive media coverage surrounding Facebook shares," he said.

"In a nutshell, my moderate forecast was based on the assessment of Facebook's revenues and expenditures, which determine the company's future development," Abdikarimov explains. "In the risk-assessment model, I tried to reflect the migration of social-network [data] traffic onto mobile devices, where monetization is relatively underdeveloped."

"In order to understand the earnings and profits of a social network, one needs to look into how it might change the market share of the main players in the Internet advertising market, players such as Google, Yahoo, and Microsoft," he said.

"During comparisons of Google's and Facebook's business models, I came to the conclusion that Facebook will attempt to strengthen communications inside the social network, coming up with new solutions for displaying ads, especially on mobile devices, and trying to diversify revenue sources, introducing new services and opportunities for users," Abdikarimov said.

Abdikarimov's initial report was titled "Facebook: (What's the Story) Social Glory?" He says the title was inspired by a 1995 album by British rock band Oasis, "(What's the Story) Morning Glory?"

Even though he had been out of university for just three years, Abdikarimov was well aware of past tech-industry bubbles.

"History shows that many experienced analysts and market researchers had missed and were not able to explain many crucial past events, such as the dot-com collapse at the beginning of 2000 or the 2008-2009 financial crisis," he said.

"Many senior executives -- such as Steve Ballmer of Microsoft or John Sculley of Apple before Steve Jobs' arrival -- missed key trends and the changing landscape of entire industries."

His Facebook valuation has put Abdikarimov under the spotlight in Kazakhstan. As he puts it plainly, his own stock has gone up in the eyes of his clients.

Playing the stock market is still a relatively niche interest in Kazakhstan, but Abdikarimov believes that there is a lot of room for future growth.

"I think it is also important to pay attention to...social networks, blogs, and mobile applications, because it paves the way for a whole new market -- the young people who are widely using these social networks," Abdikarimov said.

"In a couple of years, this generation will form the core investment base in Kazakhstan."

Based on reporting by RFE/RL's Kazakh Service; translated from Russian by Farangis Najibullah