Mixed Views From Facebook Underwrites

by Ed Liston · June 27, 2012

HOUSTON, TEXAS (StockMarketWatch) – Facebook Inc. (NASDAQ:FB) saw its shares fall further Wednesday morning as underwriters of its controversial IPO last month kicked off coverage of the stock with notably mixed views from underwrites.

Facebook shares were down about 2.3% to $32.35. The stock has jumped about 22% since hitting a low point earlier this month, but remains below its IPO price of $38.

The raft of initiations reflects the end of the so-called quiet period following Facebook’s IPO. In that 40-day period, analysts from the 33 firms that had hands in underwriting the offering were not allowed to publish recommendations on the stock.

The Menlo Park, Calif., company made its trading debut on May 18 in a deal that valued the social network at $104 billion. The deal raised $18.4 billion. The debut was plagued with technical problems on the Nasdaq as well as criticisms that the underwriters withheld material research from many investors that cast doubt on the company’s growth outlook.

Potential revenue streams include ad networks, subscriptions, digital-media sales and more, according to the analysts. But risk factors include a dual-class stock structure; no current presence in China, the largest Internet market; and a potentially large additional stock supply when lockups expire and options are exercised. Plus, management hasn’t yet proved its capabilities, he wrote.

B. of A. Merrill analyst Justin Post also professed being “positive on [the] long-term fundamentals” at Facebook, putting a $38 price target on the stock. That’s 44 times his 2014 earnings estimate.

Facebook, Inc. (Facebook) is engaged in building products to create utility for users, developers, and advertisers. People use Facebook to stay connected with their friends and family, to discover what is going on in the world around them, and to share and express what matters to them to the people they care about. Developers can use the Facebook Platform to build applications and Websites that integrate with Facebook to reach its global network of users and to build personalized and social products. Advertisers can engage with more than 900 million monthly active users (MAUs) on Facebook or subsets of its users based on information they have chosen to share with the Company, such as their age, location, gender, or interests. It offers advertisers a combination of reach, relevance, social context and engagement.