Facebook slides as mixed ratings soar

2012-06-28 15:56
New York - The Wall Street analysts who know Facebook best are giving the company's stock a mixed review.

A flood of analyst reports from 33 banks gave Facebook's stock a mix of "Neutral" and "Buy" ratings on Wednesday. And there was at least one review that equated to a "Sell" rating.

It marked the end of the 40-day quiet period following Facebook's initial public offering.

Analysts at banks that led the IPO were finally allowed to give public opinions on the stock, offering the first glimpse of what the IPO's underwriters really think about Facebook.

Mixed

Facebook's IPO landed with a thud on 18 May, with the stock closing just 23 cents above its $38 IPO price. It hasn't fared much better since.

On Wednesday, the stock fell 87 cents, or 2.6%, to close at $32.23. That's 15% below the IPO price.

Morgan Stanley, the lead bank in the IPO, gave a $38 target price for Facebook's stock over the next 12 months. That's the same as the IPO price Facebook has failed to match since its first day of trading.

The analyst, Scott Devitt, said Facebook has long-term opportunities in mobile advertising despite recent concerns.

"The mobile ad market remains in its infancy - while we believe Facebook will lead the market in mobile ad targeting, agency and brand transitions to mobile may take longer than expected," Devitt wrote.

Daily utility

Facebook derives the bulk of its revenue from advertising on its website, and while it has been testing mobile ad products, it warned before its IPO that its mobile users are growing at a faster rate than the revenue that it's making from them.

The disclosure spooked some investors ahead of the company's initial public offering last month, and likely contributed to the stock's lukewarm reception.

William Blair's Ralph Schackart also gave the stock an "Outperform" rating, and said Facebook is "becoming a daily utility", making it difficult for people to switch to a different platform.

"While virtual, the social interaction that users engage in via updates, status changes, likes, shares, and playlists, among others, builds long-term relationships and audiences," Schackart wrote.

Mark S Mahaney of Citi Investment Research also called Facebook an internet utility, comparing it with the likes of Amazon and Google. Facebook, he noted, will soon reach 1 billion monthly users and 600 million daily average users.

"By any comparison, these are startlingly impressive metrics," wrote Mahaney in a note to investors. "Facebook could, in fact, become the largest [internet] platform one day in terms of revenue and profits, given the size and engagement of its user base and its high-margin business model."

Dual-class structure


Nonetheless, Mahaney put a "Neutral" rating on Facebook's stock, calling the company's dual-class stock structure one of the biggest investment risks.

Facebook, like several other technology and media companies, has two classes of shares in order to keep voting control in the hands of its executives and early employees. CEO Mark Zuckerberg controls the company through more than half of its voting stock.

Credit Suisse found "a lot to 'like'" with Facebook, but gave its stock a "Neutral" rating and a target price of $34.

Analyst Spencer Wang said that while Facebook is in a good position to capitalise on the growth of social media, its stock price already reflects a "fair amount" of this growth, limiting his enthusiasm.

Goldman Sachs, which owns a small stake in Facebook and was one of the leading underwriters of its IPO, gave the social network a "Buy" rating.

Analyst Heather Bellini said that the company is poised to dominate the next phase of the internet's evolution, "and as such will maintain industry high growth rates throughout next decade".

A rare "Underperform" rating came from Daniel Salmon at BMO Capital Markets. He gave the stock a $25 target price and said that his research shows "mixed" opinions on the effectiveness of advertising on Facebook.

- AP
Read more on:    facebook  |  internet
NEXT ON NEWS24X
SHARE:

Read News24’s Comments Policy

24.com publishes all comments posted on articles provided that they adhere to our Comments Policy. Should you wish to report a comment for editorial review, please do so by clicking the 'Report Comment' button to the right of each comment.

Comment on this story
0 comments
Add your comment
Comment 0 characters remaining
 

Inside News24

 
SPONSORED CONTENT
5 crucial questions to ask before you take that job 2014-10-30 08:00

You choose your employer just as much as they choose you. Here are 5 of the most important things you should find out about a company before you sign up.

/News
 

LOL! Best outdoor girl fails

It’s not only guys who have FAIL moments! Here are some of the funniest outdoor fails where girls are the victims!

 
 

Where were you when you last felt alive?

90-year-old's incredible travels
10 facts about swimming you didn't know
Halloween night run
Exciting new zipline for Cape Town!

Jobs in Cape Town [change area]

Property [change area]

Travel - Look, Book, Go!

Magical Massinga

Spend 5 nights at the gorgeous Massinga Beach Lodge in Mozambique and only pay for 4 from R13 220 per person sharing. Includes return flights, accommodation, transfers and romantic turndown. Book now!

Kalahari.com - shop online today

Save up to R2100 on electronics! – As seen in the catalogue

Wishing for tech gadgets this festive? Save up to R2100 on hot tech products at kalahari.com. While stocks last. Shop now!

Toys 4 for the price of 3

Buy 4 toys and get the cheapest FREE! Offer valid while stocks last. Shop now!

Seen something you like in our catalogue?

Find the perfect gift and save up to R5000 – As seen on the catalogue. Hurry and shop now!

Mind blowing deals on electronics!

Save up to 35% on electronics. Offer valid while stocks last. Shop now!

Hot offer: Up to 50% off irons

Save up to 50% on all Philips irons. While stocks last. Shop now!

OLX Free Classifieds [change area]

Samsung Galaxy s4

Mobile, Cell Phones in South Africa, Western Cape, Cape Town. Date October 24

Best bargain in big bay

Real Estate, Houses - Apartments for Sale in South Africa, Western Cape, Cape Town. Date October 25

VW Golf 6, 1.6 Trendline (Excellent condition)

Vehicles, Cars in South Africa, Western Cape, Cape Town. Date October 25

Horoscopes
Aquarius
Aquarius

There may be some tension that is caused through social conflicts -- personal interests versus obligations. You may feel an...read more

There are new stories on the homepage. Click here to see them.
 
English
Afrikaans
isiZulu

Hello 

Create Profile

Creating your profile will enable you to submit photos and stories to get published on News24.


Please provide a username for your profile page:

This username must be unique, cannot be edited and will be used in the URL to your profile page across the entire 24.com network.

Settings

Location Settings

News24 allows you to edit the display of certain components based on a location. If you wish to personalise the page based on your preferences, please select a location for each component and click "Submit" in order for the changes to take affect.








Facebook Sign-In

Hi News addict,

Join the News24 Community to be involved in breaking the news.

Log in with Facebook to comment and personalise news, weather and listings.