Facebook Inc. (NASDAQ: FB) has been a total disaster and a complete disappointment since coming public. The IPO actually may have been such a disappointment that it became one more catalyst further destroying the trust of an entire generation of equity investors. While shares had bounced 30% from the lows and went out at $22.86 on Friday, the cover story on Barron’s over this past weekend really panned the Facebook valuation.
The report was rather scathing. After all, Barron’s said that the stock’s 61 billion valuation is still way too high as its business model is in drastic need of change. Here is why Barron’s said that Facebook is worth only $15 per share. We have also added in some other takes as well.
Andrew Bary of Barron’s wrote that the valuations are still very high (47-times 2012 earnings and 36-times 2013 earnings) and that it has been unable to monetize the move from the desktop to mobile. Even at $15 it is still not cheap, according to the report.
Barron’s also showed that Dan Salmon of BMO Capital Markets has a mere price target of $15. Other analysts have been more cautious over the past month as well, but most analysts still maintain somewhat bullish views. Needham & Co. recently trimmed its target to $25 from $40 and Barclays recently lowered its price target to $23 from $31. Even Morgan Stanley, the lead underwriter, lowered its price target to $32 from $38. And J.P. Morgan cut its target down to $30 from $45. Deutsche Bank recently started coverage with a Hold and only a $22 price target.
A positive call was given just last week as Facebook was initiated with a Buy rating with a $26 target price from Cantor Fitzgerald. One other positive exception to the rule is that Jefferies initiated coverage on Facebook with a Buy rating and a $30 target, but that was early in the month.
The competition from LinkedIn Corp. (NYSE: LNKD) is not as much of a threat as the shift to mobile. Almost every business keeps reporting about the increased use of mobile usage, but how much less valuable mobile is than desktops. Smartphone use from Apple Inc. (NASDAQ: AAPL) for iPhone and Google Inc. (NASDAQ: GOOG) for Android-based phones are perhaps the two biggest pressures out there. Google+ is not even as large of a threat yet as is just the raw defection to mobile use.
The report from Barron’s highlights many weaknesses. Many of those are obvious. Just last week Porter Bibb of Media Tech Capital Partners said on CNBC that CEO Mark Zuckerberg is “in over his hoodie.”
Barron’s seems to be winning versus the bulls so far. Shares are down more than 5% at $21.67 in active trading this Monday.
JON C. OGG