San Francisco - Wall Street’s top financial firms delivered
highly-anticipated assessments of social networking phenomenon Facebook on
Wednesday, giving a cautious nod of approval about the company a month after
its rocky initial public offering.
Analysts said they see significant long-term potential for
Facebook - the top social networking website - and expect it to corner a
substantial share of the global internet advertising market. But risks remain,
given limited visibility over the business model and uncertainty over mobile
monetisation.
Barclays Capital, Stifel Nicolaus and Citi Investment
Research & Analysis set a “hold” or equivalent rating on the stock, while
Morgan Stanley and RBC Capital Markets began coverage of Facebook with their
top ratings.
The batch of analyst notes represent Wall Street’s most
broad-based assessment of the social networking phenomenon, which retained 33
financial firms as underwriters for its high-profile IPO in May.
Banks that participated in Facebook’s IPO were generally
required by securities regulations to wait until 40 days after the offering
before publishing their views, limiting the available research about Facebook
to date to a handful of analysts not involved in the offering.
Analyst Scott Devitt of Morgan Stanley, the lead underwriter
of Facebook's $16bn IPO, set an “overweight” rating and price target of $38 on
the stock.
Devitt, who told Morgan Stanley’s major clients that he cut
his revenue estimates on Facebook just days before the IPO, on Wednesday said
the company is uniquely positioned to leverage its large and highly-engaged
user base to monetise the mobile internet.
However, analysts at Barclays cited concerns over the
company’s ability to derive any meaningful revenue from its increasing mobile
usage.
Barclays analysts set a price target of $35, while RBC set a
$40 target on the company’s stock.
Shares of Facebook remain below their $38 offering price,
trading as low as $25.52 before regaining ground to trade in the $31 to $33
range in recent days.
One of the most highly-anticipated offerings in history, the
Facebook IPO was marred by a series of technical glitches by the Nasdaq exchange
that caused order fulfillments to be delayed for many investors.
Facebook’s decision to increase the size of the offering by 25% days ahead of the IPO, as well as concerns about Facebook’s decelerating revenue, also weighed on the stock, according to some observers.