Facebook stock hits new low

The company has lost nearly 40% of its value since it went public in May.

By Kim Peterson Jul 27, 2012 1:44PM
Updated 6:15 p.m. ET

(FB) is a market disaster. The stock price is down 20% in two days. Investors are fleeing this thing, even after an earnings report that beat revenue expectations.

We knew where the stock price was headed after watching shares plummet as earnings were announced. The carnage continued Friday, and Facebook shares fell to a record low of $22.28 before bouncing back to close at $23.71. Facebook has now lost about 37% of its value since it debuted at $38 a share in May.

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What's going on? Is the market truly disgusted with Facebook, or is everyone overreacting after a week of disappointing earnings from Apple (AAPL), Starbucks (SBUX), Zynga (ZNGA) and Amazon (AMZN)?

It seems the discontent surrounding Facebook breaks down into four main areas:

1. No guidance. Several companies, notably Google (GOOG), don't give earnings forecasts, and Facebook decided to join the group. But with so many other red flags and unanswered questions surrounding Facebook's future growth and profit, the lack of guidance makes it very hard to get any sense of where the company is headed.

2. Slowing user growth. The number of daily active users was up about 5% in three months. The number of monthly active users was up 6%. A slowdown in user growth was inevitable, particularly in the U.S. Facebook is now seeing user growth in India, Brazil and other countries that produce less ad revenue.

3. Big questions about mobile. Facebook users are clearly connecting more with mobile devices -- 57% of users now access the site that way -- but the company doesn't make much money from them. It can't flood mobile users with ads, and mobile users don't make as many in-game payments as PC users. Investors want to see big progress here, and so far Facebook isn't offering it.

4. Costs are growing. Expenses have nearly tripled from a year ago to $1.93 billion, The Wall Street Journal reports. Much of that is related to stock-based compensation and other payroll expenses. Capital spending more than tripled to $413 million. Operating expenses are going to keep increasing, executives said.

Four brokerages cut their price targets on Facebook after the earnings report. Some analysts were worried about what happens after Aug. 19, when a lockup period expires and some early investors are allowed to begin selling their shares. The concern is that those investors will flood the market with shares and bring the stock price down further.

Still, only one brokerage rates the stock a "sell" and only one rates it a "strong sell," Reuters reports.

"Based on the aftermarket reaction to the earnings, it appears that investors wanted more than a slight beat," Piper Jaffray analysts said in a note.

So the question for investors becomes this: How low will Facebook shares go before they're considered a buy? Or maybe the better question is how much Facebook shares are worth. Estimates have ranged from $7.50 a share to $40 or higher.

The real problem -- and the real reason shares are taking this week -- is that no one knows how much Facebook is worth. Everyone is just stumbling around blindly.

Facebook is a public company -- and as such its true owners are its shareholders -- but the company doesn't give those owners enough information to indicate its worth or its potential. Its success hangs on mobile users, and right now it doesn't have a good way to make money from those users. "Facebook fatigue" is hitting some users, which leads to questions about engagement. And the company is getting increasingly slimy, which I have written about at length.

Facebook is surrounded by question marks, clouds and red flags. It's no wonder shares are hitting these lows.

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Jul 27, 2012 2:41PM
End face book and get your life back
Jul 27, 2012 2:43PM
Is it any suprise.  its just a fad and like any fad it goes away.
Jul 27, 2012 2:43PM

Secretly (or not so secretly) everybody HATES facebook and what is stand for. Everybody I know is rooting for its eventual failure.


And to all those rubes that drank the purple kool-aid and bought into the IPO......HAHAHA suckers!

Jul 27, 2012 2:50PM
It's a social network that produces nothing of value and only makes revenues off of ads. It's not going to gain in value. 
Jul 27, 2012 3:21PM
How much can a company that has no real product be worth ?
Jul 27, 2012 3:44PM
Bragbook oh I mean Facebook will be gone within 5 years what a joke of a business. 
Jul 27, 2012 3:26PM
I said it on the day the IPO came out and I will say it again. HAHAHAHAHAHAHAHA!!!!!
Jul 27, 2012 3:30PM

You can't eat it. You can't drink it. It dosen't make anything you can use to better your life. It dosen't help any illness. Enough! Just a investment that is volatile so traders can short or go long  to make a profit everyday.

Jul 27, 2012 3:19PM
If you invest in something like Facebook, you get in early and you get out, if you get in at all.  There is nothing tangable to companies like these, they are entertainment.
Jul 27, 2012 3:27PM
"Costs are growing...Much of that is related to stock-based compensation and other payroll expenses."

All together now CEO BONUSES!!
Jul 27, 2012 4:17PM

It's a penny stock. It never had anything to sell, only to give away, and that doesn't bring in the long green.


How it ever got as far as an IPO says more about mass delusion than mass market.

Jul 27, 2012 4:02PM

FB should have never gotten this far.  Yahoo is just as good and not near as much trouble. This country's adolescents supported FB in the beginning and investors thought it was going to be the best thing since rubber bed sheets.

And there are places on the internet that want people to sign into FB just to dis-like or visit friends or update profiles. DON'T DO IT!! Everytime someone logs into FB or any other site, it gives the site owner more fuel to charge more  to its advertisers  through pseudo-popularity.

Yahoo is just as good and not near as much trouble.  And FB has also hurt itself by widespread advertising of itself and trying to get people to "like" this or that. DO NOT HIT THE "LIKE" BUTTON!!

Jul 27, 2012 4:12PM

who wants to go on the internet and turn on "commercials"? I deleted all my real friends and family and personal information. Now I just play games (no money ever spent) with strangers while I wait for someone to call upon my resume. Im not going to help an entity take my information and push ads on my, already streched to the limit, friends and family. End of story.

Jul 27, 2012 5:37PM
Can't wait until it disappears. Very annoying, silly crap.
Jul 27, 2012 3:42PM
Somehow they figured out this is the acne sets haunt not the target for their advertisers. I back off when GM got out .....Well theguy got rich fooling the public and that seems to be the game today. Nothing else matters...now he is off to make another venture into the smartphone/tablet world
Jul 27, 2012 4:25PM
Note that facebook's accounting statements are unaudited.  Seven billion is invested in undisclosed securities and expenses have quadrupled in the past three months.  This does not bode well since Zukerberg has an undisclosed Russian partner calling the shots.  User figures are grossly overstated with over 50% of the users having not been active in the past 30 days.  Were still debating on if the 9.0 million figure reported on Tuesday or Zukerbergs 9.5 M is better but clearly over 50% of those users have abandoned their accounts.  Showing a 1.0 billion loss of income in the last three months is not a buy signal when promises of increased earnings were used to sell the IPO.
Jul 27, 2012 5:20PM
Jul 27, 2012 4:33PM
omg, I never saw this coming!  :P
Jul 27, 2012 3:16PM
If you invest in companies like Facebook, you get in make some money and get out !
Jul 27, 2012 5:56PM
And zuckerberg will get out and run his wife isn't from this country, so all he has to do is pack his bags dump the stock and live on what he has left. How can you trust a guy who stuck a knife in the back of the guy who made his facebook possible by putting up the first monies needed.
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