Will Facebook Ever Dig Itself Out of This Hole?
Facebook’s (NASDAQ:FB) catastrophic initial public offering put the social network in a deep hole; its shares began falling within hours of its debut on the Nasdaq, and the stock is currently about 26 percent below its IPO price of $38 per share. Not only did it trip over its IPO, but the company has had a difficult time working its way back from the losses. Facebook has never really been able to convince investors and analysts that its business model can be truly profitable in the long run.
Analysts and investors may have temporarily forgotten these issues after evidence of mobile monetization in the third quarter, but the company’s fourth-quarter earnings brought monetization issues back into the spotlight. Ahead of the release, the stock was gaining upward momentum — it had increased 50 percent since November — but the run did not last. Analysts at BMO, Citigroup, and Stifel Nicolaus all hit “unfriend” the following day, downgrading Facebook’s stock based on the concern that the company was spending too much money on making its mobile platform generate higher revenues.
Now, analysts at Sanford C. Bernstein and BTIG have followed suit. They have identified a similar problem…