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Facebook (NASDAQ:FB) fell to a new record low after Morgan Stanley, one of the lead underwriting banks during the company’s IPO, cut its price target on the social network. Facebook touched a low of $17.55, the deepest it’s been since going public at $38 on May 18.
Morgan Stanley analyst Scott Devitt cut his price target on the company for the next 12 months by 16 percent to $32 from $38. He also warned that shares could even fall as low as $17.
Devitt also cut his long-term revenue projections for the company after saying he thought users were likely to see fewer advertisements and that they would become less and less engaged. He added that while mobile ads could be four times as valuable as web advertisements because more users click on them, he expected users to see 5 percent fewer ads as mobile usage increased. The worst-case scenario of $17 could occur if the social network’s new ad formats don’t appeal much to advertisers.
“Facebook has improved the speed and functionality of its mobile apps, and appears to be monetizing more aggressively with mobile Sponsored Stories,” Devitt wrote. “However, we reduce our LT estimates and PT as higher mobile pricing offsets fewer ads/user, and late adopters slow the rate of engagement growth.”
On Friday, Bank of America analyst Justin Post had cut his price target 34 percent, citing impending expirations of lockup agreements that had prevented early investors from selling their shares in Facebook. BMO analyst Daniel Salmon also cut his price target 40 percent, writing that the company might not meet its 4 percent revenue growth target in the third quarter.
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