How low will Facebook go?

The market isn't buying the stock's $38 IPO price, pushing shares below $34 Monday. Where is this stock headed?

By Kim Peterson May 21, 2012 4:28PM
Facebook's (FB) initial public offering was incredibly successful -- for the company and its early investors.

They breezed away Thursday with an IPO price of $38 a share. Was it too high? Definitely. But hey, Facebook hauled in $16 billion, and now has enough money to do and become just about anything it wants. Early investors like Goldman Sachs (GS) also got a nice piece of the pie.

Those who bought into Facebook on Friday with dreams of big money, however, are left holding the bag.

Post continues below.
Facebook shares barely held on to the $38 support level Friday as the deal's underwriters presumably used all the tools at their disposal to prop up the share price. Throw in the various screwups from Nasdaq and, well, the words "faceplant," "facerip" and "IPOcalypse" are on the minds of some.

It looks like the underwriters gave up Monday, and Facebook shares dropped below $34 at various points throughout the day and closed at $34.03.

Now, the question on investors' minds is how low will the stock go? At the $34 price the stock hovered at Monday, it was trading at about 57 times projected earnings for the next year, according to FactSet research (and cited by The Wall Street Journal). Google (GOOG) trades at about 14. Apple (AAPL) trades at 10.3.

Former analyst Henry Blodget crunched the numbers in a very smart post and guessed that a fair price for Facebook would be between $16 and $24. Another analyst, Pivotal Research Group's Brian Wieser, gave the stock a $30 price target with a "sell" rating.

Other analysts were more positive, expecting the stock to grow in the future. Michael Pachter of Wedbush Securities put a $44 price target on the stock. A Susquehanna analyst picked $48.

Are those targets too optimistic? The stock has clearly lost all momentum, and probably won't gain back any juice until the company offers an impressive quarterly earnings report. But that may not happen anytime soon, as Facebook's user growth and advertising revenue growth are slowing. The company's capital costs are high, too, as it builds out data centers.

So where do you think Facebook shares are headed?


28Comments
May 21, 2012 4:49PM
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end of may: $ 20

end of june: $ 10

end of july: $ 5

.....

 

May 22, 2012 8:05AM
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Soon to be a penny stock. FB is for people with no life.
May 21, 2012 9:22PM
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FB's stock worth is near $8.00 at best. What a shame...
May 22, 2012 7:35AM
May 21, 2012 6:19PM
May 22, 2012 9:34AM
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Just another case of technological social media hype. These companies offer few if any real services to the general population, and revenues are going to be limited. Looks like another "technobubble"!
May 22, 2012 9:26AM
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57 times earnings wow- should have bought that bridge in new York
May 22, 2012 9:22AM
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I'm not a stock broker or any one who has those types of securities, however, I firmly believe that Facebook stock will drop drastically if it forces more updates like "Timeline" on their users with no other option to keep the classic view, as a publicly traded company, you would think that the company would not try and "force" users to do this and that will be their down fall, this is another Netflix waiting to happen.

Its a social site, so how does it get revenue if most users block advertisers? are the advertisers stupid or something?? so if advertisers pull out, the stock will really bottom as it will be worth less.

As an end user, I am getting sick of Facebook and how it keeps trying to get me to use timeline, I have tried timeline remove and it helps when viewing profiles and as soon as Zuckerburg finds a way to block the app (which I am sure he is trying to do because its "his" web site) ill be leaving Facebook.

Before anyone invests in Facebook, they should take a look at all the disgruntled users of timeline (and its gonna get worse) and think to themselves "what other disaster does Zuckerberg have up his sleeve?" Remember, ITS WE THE USERS THAT MAKE THE SITE! There is no service offered with the site (meaning you don't use Facebook to buy stuff etc. not that anyone would want to due to security issues) so it does nothing more than share messages and pictures. If Facebook po's enough users they will leave in droves and your investment will be in the toilet. So all I can say is drop it like a hot potato.
May 22, 2012 9:22AM
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Just the latest fad- remember MySACE ? Actually I thought MySPACE was better
May 22, 2012 9:44AM
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it had a AAA rating like the subprime mortgages

 

hehe

May 21, 2012 7:11PM
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Remember that Google's IPO had a forward PE of 118 and the stock price was super volatile for months following the IPO. Facebook's forward PE of around 60 seems reasonable if the revenue growth projection is believable. The problem is that people don't have as much faith in Facebook as they did in Google, and when compared to Google, Apple and Microsoft's current forward PE of around 10 to 15, the price of Facebook stock seems a little crazy. However, look at Amazon's PE right now - 180 with a forward PE of 85! Compared to that, the Facebook stock price might be close to what it should be at for now, maybe still a little bit high, but as long as the next quarterly earnings report is good (really good), expect the price to hold and then start going up as revenue increases. Of course, if Facebook earnings don't beat expectations, expect the stock to drop like a rock down to a more reasonable PE of around 15, putting the stock price at something like $16.

May 22, 2012 8:59AM
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Let me know how that works out for you user.  I got your 28 bucks right here Bozo.

May 22, 2012 10:06AM
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Hopefully, this is the beginning of the end.
May 22, 2012 8:37AM
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I will buy it on the dip around $8-$10  and hold it until 2015 and sell for $24- 28.
May 22, 2012 10:06AM
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Wow, they say a rising tide raises all boats.


Apparently the Facebook ship has a hole you could drive a bus through.

 

Their business plan has more holes than a sieve.

May 22, 2012 10:00AM
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Where is Sheryl Sandberg now; Facebook’s COO? Doesn't she have anything to say about this disaster? Does she only do interviews when she's giving away investor money to noble causes and charities, or when she’s hinting that she might run for a high public office one day? Why haven't we seen one interview in the Mainstream Media with Facebook or Wall Street execs who were on the inside of this IPO? What a con job; a Disneyland fantasy dream come true for the insiders, and a nightmare for everyone on the other side of it.

May 22, 2012 9:04AM
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This stock was overinflated by the same people who wrote this article.  1 week ago, it was the greatest thing since sliced bread - TO EVERYONE - save a few contrarians.  Sell all you want, it makes it cheaper for the rest of us.

 

Maybe next time every college grad with a grand will read BEFORE investing and hold on just a little longer when they don't double their money overnight.

May 22, 2012 10:09AM
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Facebook will bottom out around $16 a share I think and then will do an about face with the new ad growth !! That's the point at which the dumb money gets out and the smart money gets in !! Facebook only needs to be right 50% of the time to make (900000000) people very happy campers !!

 

 

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