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.

By MSN Money Partner May 17, 2013 1:25PM

File photo of the Facebook logo on a screen inside the Nasdaq Marketsite in New York (© Shannon Stapleton/Newscom/Reuters)
By Jenny Cosgrove

 

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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Tags: FBIPO
4Comments
May 17, 2013 5:26PM
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I think I'll skip the anniversary this time and invest in the divorce.
May 17, 2013 6:49PM
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No - I'll let you have this one to yourself Jenny !

 

The adults are quickly dumping Facebook and going to Twitter and Instagram, The kids are going towards snap chat - In a couple of years this will be another "My Space" Remember them ?

May 19, 2013 3:45PM
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It's been reported that Yahoo will be buying Tumblr. That will take about 1Billion from Yahoo's 3 Billion cash position. Facebook has around 10Billion in Cash and will likewise likely continue to buy companies that will only add to earnings moving forward. Stock can be used as Cash and Credit is dirt cheap. I wouldn't shovel dirt over FB quite yet. A strong Balance Sheet and cheap credit can do amazing things for your company. By the way, the forward PE is around 34. No, that PE isn't a given but if FB does deliver, this stock will reflect that. Until the Epic fail induced by the Global Feds occurs, FB still has a chance to have it's day in the Sun.
May 19, 2013 4:22AM
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Yahoo says Facebook's P/E is 553, E*Trade says is 2,200.  This brings to mind the legendary mutual fund manager Peter Lynch's book "One Up On Wall Street" where he says that if you had invested in a similar stock during King Arthur's time, you'd just be breaking even.  He says that if investors are discounting future earnings, they're discounting the Hereafter!
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