Facebook Trips Over a Downgrade and Joins Broad Tech Slide
Facebook (NASDAQ:FB) tripped and fell as much as 6 percent in early afternoon trading Tuesday after getting slapped with a downgrade from financial services firm Raymond James. The firm, citing the company’s now enormous valuation, pulled the stock down from Strong Buy to Buy but raised its price target from $39 to $56 per share.
The downgrade appears as if it was a long time coming. Facebook stock soared following a second-quarter earnings report that smashed expectations and pretty much drove every last bear out of the stock, but the subsequent euphoria perhaps drove valuation a little too high. Facebook revenue increased 53.1 percent on the year to $1.8 billion, beating the average analyst estimate of $1.62 billion. Adjusted earnings increased 58.3 percent on the year to 19 cents per share, beating the average analyst estimate of 14 cents per share.
Perhaps most importantly, Facebook reported that mobile advertising revenue accounted for approximately 41 percent of total advertising revenue for the quarter, up from 30 percent in the previous quarter. This news certainly justifies investor optimism, but the company has a trailing 12 month price-to-earnings of 215 — a little pricey.