Add to the list of Facebook’s (NASDAQ: FB) woes that Citi began coverage of the company with a “neutral” rating and a price target of $35, or $3 below the IPO price. Facebook shares have rallied lately, but still trade at only $33.33.

Facebook has been through a slew of problems, including trouble with its IPO, which has been partially blamed on Nasdaq (NASDAQ: NDAQ). But the real problem the company faces is related to whether it can grow fast enough to satisfy Wall St. and justify its $80 billion valuation. Facebook has had occasional problems with large advertisers and has struggled to detail a strategy to open its mobile platform to marketers.

According to MarketWatch, Citi analysts wrote:

The shares provide “[significant] long-term potential, offset by medium-term risk,” the analysts wrote in a Wednesday report. On the plus side, Facebook can take advantage of its “almost unassailable position as the social-networking leader,” with 900-million-plus users and a global Internet-ad market that could be valued at $130 billion by 2015, Mahaney and Doshi wrote. Potential revenue streams include ad networks, subscriptions, digital-media sales and more, the analysts wrote. Investment risks include the dual-class stock structure; “limited appeal to advertisers today,” based on a Citi survey; unclear ability to convert a mobile platform into revenue; no current presence in the largest Internet market, China; and potential large additional stock supply when lockups expire and options are exercised, Mahaney and Doshi wrote. Their price target values FB at 40 times their 2014 earnings estimate, a “premium” multiple but one that’s supported by the company’s growth rate.

Douglas A. McIntyre

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