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Facebook (NASDAQ:FB) has been a roller coaster for investors. Since its infamous IPO on May 18, shares have tumbled just shy of 47 percent, but many analysts maintain “Buy” ratings and price targets in the mid-$30 range. The social stock is more vulnerable to investor confidence than most because of its dubious revenue model and insane hype. Recent social IPOs like Groupon (NASDAQ:GRPN) and Zynga (NASDAQ:ZNGA) have suffered tremendously since they went public, but Facebook stands apart because of its nearly 1 billion-user base and massive potential for advertisers.
In order to survey how the social network is doing, here is what some of the experts are saying:
Andrew Bary at Barron’s caused a stir on September 22 with a cover story suggesting Facebook shares were worth “perhaps only $15.” The stock, which had been seeing something of a rally the previous week, took a beating on September 24, the first day markets were open following the article’s publication. Bary writes that his price target “would be roughly 24 times projected 2013 profit and six times estimated 2013 revenue of $6 billion, still no bargain price. Wall Street’s consensus estimate for 2013 shows earnings rising 31%, to 63 cents a share.”
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On September 5, Wedbush Securities analyst Michael Pachter had a price target of $35 and an “Outperform” rating on the stock. On NBC News he said, “I think the big surprise at earnings time was that they’re spending so much more money,” adding, “once investors see both revenues ramping for the reasons that Evan [Wilson] just outlined, and that when spending is under control, you’re going to see profits. And when you see profits, the share price is going to go up.”
Evan Wilson is an analyst at Pacific Crest Securities who told NBC in the same segment that “historically, Facebook has been a company that’s gone as slow as they can in terms of monetizing the site with advertising, and that’s clearly changed. I think this is very quickly turning into an advertising company, rather than an engineering-driven, product-focused, user-first company.” According to eMarketer, Facebook will be number two in display ad revenue for 2012, behind Google (NASDAQ:GOOG) and ahead of Yahoo (NASDAQ:YHOO).
In the face of employee lock-up restrictions expiring, S&P Capital IQ equity analyst Scott Kessler upgraded his rating to “Buy.” “We do not expect early employees and investors will be aggressive sellers of FB shares at current levels,” he wrote. However, original investor Peter Thiel has already sold off 87 percent of his shares. By September 8, co-founder Dustin Moskovitz had unloaded 7.5 million shares, although he maintains the majority of his holdings.
Regarding a possible Facebook search tool, Jefferies analyst Brian Pitz wrote, “Facebook already has a team in place working on search, which is not surprising given the company sees so many daily queries. But monetization will take time and we think the relatively narrow scope of Facebook’s search limits overlap with Google, for now.”
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