Washington - Facebook
shares have lost nearly half their value since a highly-touted public offering
in May, but are still not a bargain for some.
Facebook in the past week
dropped below $20 a share for the first time since its $38 offering price in
May. On Friday, the stock rebounded 5% to $21.09, but remains down a hefty
There is some fear that
shares could take another hit in mid-August after the expiration of a
"lockup," a 90-day period after the IPO during which insiders are
barred from selling.
Michael Comeau of the
financial website Minyanville said 268 million shares could come onto the
market, in addition to the 460 million that are already floated. More will
become available later this year.
"I'm fixated on the
268 million shares that hit in two weeks," he said. "Will there be
enough buyers to satisfy the new supply?"
Comeau said analyst
full-year earnings estimates on Facebook "are actually coming down"
from 51 cents per share to 49c.
estimates are usually a negative indicator for momentum stocks," he added.
Facebook underwhelmed the
market in July when it reported its first earnings as a public company, barely
meeting estimates for earnings per share and delivering disappointing revenue
The results showed growth
for Facebook in overall revenue, operating profits and the number of users -
which increased to 955 million by the end of the quarter.
But the company indicated
in a regulatory filing that as many as 83 million accounts may come from
dubious sources - duplicate accounts, pages for pets and those designed to send
Trip Chowdhry at Global
Equities Research, who has consistently said Facebook was overpriced, said the
company may be a victim of its own success.
Facebook. Your parents are on Facebook. Your neighbours are on Facebook,"
"So what do people do?
They create fake IDs or they go hang out somewhere else. People are reducing
their engagement on Facebook."
Chowdhry said it remains
unclear if Facebook can "transcend" the current generation of users,
or will be replaced by something else.
Additionally, he said there
is "a lot of uncertainty" about the expiration allowing insiders to
sell, adding the stock is still not a bargain.
"The stock is
reflecting that the company can grow 80% to 90% year-over-year, which is
impossible," he said.
Larry Chiagouris, a
professor of marketing at Pace University, said Facebook has yet to define its
strategy for long-term growth and profits.
Chiagouris said founder
Mark Zuckerberg's mantra that he wants to "help every person stay
connected" and "be a great social experience" is too fuzzy.
"That is not focused
enough," he told AFP.
expanded too quickly without articulating their mission. From a profit-making
perspective, Facebook has kind of lost its way."
Chiagouris said most
important for him is that marketers are cool to expanding the use of the
"The large marketers
know exactly how many people are clicking on the ads and to what degree that is
helping marketing," he said.
"Facebook has yet to
prove it is a good return on investment."
Lou Kerner of the Social
Internet Fund remains upbeat on Facebook, saying it will rebound similar to
Amazon after the dot-com bubble burst over a decade ago.
"The lesson I learned
from the last bubble is you have to separate what the market is doing from the
fundamentals of the business," Kerner said.
"And the fundamentals at
Facebook continue to be positive."
One of Facebook's problems,
he said, is that it has "too many customers" especially on the mobile
internet, but that the company will find a way to leverage that massive user
"I think it's turned
into a 'show me' stock," he said.
"As soon as Facebook shows it can
meaningfully monetise its mobile users I think you'll see the shorts
(short-sellers) cover and people lining up to buy."
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