As Time noted this week, Facebook has yet to perfect its advertising strategy and is not seeing consistent growth in that area. So even while its active user base creeps toward 1 billion, monetizing that popularity still can look iffy. With these types of questions about long-term revenue looming, some investors may not be willing to pay $28 to $35 per share.
"If we put their financial reports into spreadsheets [and] forecasts, in order to justify a valuation anywhere close to the numbers for the IPO, we have to put some pretty aggressive growth assumptions in there," says Chapman.
However, the company's high valuation may very well be justified. "The valuation does seem high relative to their most recent revenues. However, I don't think the optimism is unwarranted," says Arun Sundararajan, an associate professor of Information, Operations and Management Sciences at NYU's Stern School of Business. "Where the attention goes, the advertising dollars go, and Facebook isn't a single-feature product. It's a whole spectrum of things. I don't see them losing consumer attention anytime soon."
Danielle Kurtzleben is a business and economics reporter for U.S. News & World Report. Connect with her on Twitter at @titonka or via e-mail at firstname.lastname@example.org.