Should you buy Facebook on IPO anniversary?
One year after a catastrophic offering, fund managers and analysts say it's time to take another look at the social network's stock.
One year after a catastrophic IPO that saw $10 billion wiped off Facebook's (FB) value and after its shares shed 40% in just three months, the company is making a comeback.
After its dramatic fall from grace, fund managers and analysts CNBC spoke to say it's time for investors to take another look at Facebook's stock.
"We didn't participate in the IPO as the management team were an unknown quantity, having run the business as a social project rather than commercial venture previously, and they had not demonstrated how they would monetize mobile traffic via their advertisement-led business model," said Jeremy Gleeson, technology fund manager at AXA Framlington.
"However, we have recently purchased some shares, as the management team have begun to re-establish their credibility and to generate revenues from mobile page views, without alienating users in the process."
Facebook announced it was going public in February last year, in the most hotly anticipated technology IPO since Google (GOOG) in 2004. However, just days after the launch in May, shares fell 11% to $34, with three shareholders pursuing lawsuits accusing the social network of leaking key information to big banks ahead of the launch.
Facebook currently has a market cap of $63.2 billion, down from $104 billion at the time of the IPO. However, asset management firm GLG said in a research note that prospects for the world's largest social media site are looking up, and highlighted its solid first quarter earnings.
"Facebook's recent results demonstrate not only solid progress in usage and engagement, but they also marked a third consecutive quarter of year-on-year advertising growth rate acceleration. Moreover, mobile revenues have grown and, having represented 2% in second quarter 2012, now account for 30% of total revenues," GLG technology analysts said in the note.
On May 1, Facebook posted quarterly earnings of $0.12 cents per shares, one cent short of expectations. Revenue grew 38% to $1.46 billion, topping analysts' forecasts. Mobiles were the company's biggest growth area, with 54% more active mobile users per month than a year ago. Nick Evans, at technology fund Polar Capital, said he was bullish on Facebook shares, but said it remains unclear whether the uptick in mobile revenue can compensate for decreasing desktop revenue.
Evans added that he thinks the technology sector as a whole is set for a recovery. "The technology sector has underperformed global equities year-to-date due to the underperformance of Apple, and lower than expected IT spend generally. However, new technology cycles tend to occur every 10 years or so, each being driven by a reduction in the cost of delivering computing and I believe we are at the start of one of these cycles now," he said.
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