Updated 4:51 p.m. ET

Facebook (FB) had a rough introduction to the market Friday.

The stock saw a quick burst in early trading, opening at $42.05, but within 20 minutes dropped back to its IPO price of $38 a share. The debut was surprisingly disappointing, given all the excitement around the IPO.

Things never really got much better. The stock later recovered slightly to more than $41, but lost steam in late trading and ended at $38.23 on trading volume of 566 million. That still placed the company's value higher than those of McDonald's (MCD), Citigroup (C) and Amazon (AMZN).

Post continues below.
With all the hype around this IPO -- and all the talk of excitement at the retail-investor level -- who would have imagined that Facebook's underwriters would be fighting to stabilize shares at $38 heading into the close? But that's exactly what seemed to happen Friday afternoon, when investors appeared keen to dump the stock before the weekend break.

One of Facebook's largest customers, Zynga (ZNGA), saw shares plunge so sharply that trading was halted twice. Zynga shares fell by more than 13% in trading to close at $7.16. Other social-media stocks also sold off. Yelp (YELP) closed down more than 12% to $18.64, Groupon (GRPN) dropped nearly 7% to $11.58 and LinkedIn (LNKD) fell more than 5% to $99.02.

Facebook's stock price and valuation have been hotly debated for weeks. Some investors were thrilled to get into the stock at just about any price. The brand is obviously well known, with more than 900 million people actively using the site worldwide.

Investors like to buy what they know, and brokers reported intense interest in the IPO at the retail level.

But critics say the "dumb money" is pouncing on the IPO while smarter investors take a wait-and-see approach. Some investors say there were too many red flags surrounding the company. Its fast-growing mobile side isn't making money, for example, and Facebook has zero presence in China, the world's biggest Internet market.

One of the biggest red flags: Facebook has shortened its so-called lockup period so that a flood of new shares could hit the market in just three months. The number of Facebook shares that trade could jump to 1 billion, Jim Jubak notes.

Facebook got hit with its first "sell" rating on Friday. Analysts at Pivotal Research Group, which made the call, set a $30 target price on the stock. "We are wary of the disconnect between revenue growth and operating/capital expense growth expectations," Pivotal analyst Brian Wieser said in a research note, according to Reuters. "The market is pricing Facebook as a less risky asset than Google, which we believe is simply not the case."

Market watchers anticipated that Facebook shares would pop on the first day. After all, most IPOs are priced precisely to generate a first-day surge -- and underwriters have tools at their disposal to keep a stock in positive territory. You want a stock to rise early to reflect healthy investor demand. When a stock falls on its first day -- which happened to Zynga in December -- it can be branded a flop.

Expectations were so high for Facebook, in fact, that one analyst said a first-day pop of less than 50% would be a disappointment. "I think anything over 50% will be considered a successful offering. Anything under that would be underwhelming," Morningstar analyst Jim Krapfel told Reuters. "A lot of retail investors are not concerned about valuation. That's what is going to drive the first-day pop."

Facebook has been compared more favorably with Google (GOOG), which was priced at $85 a share in 2004 and ended its first day at $100. The stock took off like a rocket after that and now trades above $600. Is Facebook the next Google? It's a question that nags even the most skeptical investors.

Unlike some other recent tech IPOs -- I'm looking at you, Groupon (GRPN) -- Facebook is profitable. It earned $1 billion in profit last year, in fact, which means Facebook was priced at 100 times trailing earnings. Compare that with Google's trailing P/E of 23.5. Apple's (AAPL) is a little less than 13.

Facebook hasn't given profit forecasts, but one analyst, Ken Sena at Evercore Partners, estimates the company could earn $4.5 billion in 2014, DealBook reports.

Facebook is clearly benefiting from a flood of investor enthusiasm. The company previously priced its IPO at between $28 and $35 a share but upped the range Tuesday to between $34 and $38. It also expanded the number of IPO shares to 421.2 million from 337.4 million.

The company raised $16 billion Thursday for itself and its early investors. It was the third-largest IPO in U.S. history, behind the $19.7 billion raised by Visa (V) in 2008 and the $18.1 billion raised by General Motors (GM) in 2010.

The $38 IPO price puts CEO Mark Zuckerberg's worth at about $19.1 billion on paper. Other large Facebook shareholders are also raking in the dough. Dustin Moskovitz, who helped Zuckerberg start the company, is worth nearly $5.1 billion. Another founder, Eduardo Saverin -- whose relocation to tax-friendly Singapore stirred controversy -- is likely worth about $1.4 billion.

Facebook's rank-and-file employees were expected to clean up as well. If you believe this calculation from 2010 on Quora, the average Facebook employee has nearly 34,000 shares -- which amounts to almost $1.3 million at the IPO price.

Several hundred employees celebrated all night long Thursday, participating in a companywide "hackathon" and staying awake until Zuckerberg rang the opening bell for the Nasdaq from Facebook's offices in Menlo Park, Calif. Employees were said to be drinking Red Bull and spinning tunes in the section of the company's headquarters known as Hackers Square, DealBook reports.

Friday is just the coming-out party for Facebook. The real test of the stock will come over the next year, after Facebook's lockup period expires and the company offers up a few quarters of earnings reports. Facebook is the star of the market now, but can it continue to meet the very high expectations of its investors?

More on Facebook's IPO

• Facebook prices at $38, largest Internet IPO ever
• How much is Facebook CEO worth?
  
• Beware the Facebook IPO
• Buy Facebook? Not if you're Buffett
• 8 stocks set to soar on Facebook IPO