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Facebook Future Leaves BTIG’s Greenfield ‘Skeptical’

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Facebook Cut to Sell by BTIG Analyst on Mobile-Strategy Concerns
Facebook fell as much as 3.3 percent in early trading in New York. The shares have fallen 45 percent since the company’s initial public offering in May. Photographer: Peter Foley/Bloomberg

Oct. 8 (Bloomberg) -- Facebook Inc.’s 2013 earnings will be “significantly below” analysts’ estimates, said Richard Greenfield, an analyst at BTIG Research, citing the social-networking site’s struggles to get revenue from mobile users.

“We’ve been growing increasingly skeptical of some of their monetization methods,” Greenfield, who cut his rating on the shares to sell, said in an interview today on “Bloomberg Surveillance” with Tom Keene.

Facebook’s payments business is “collapsing” as companies such as game maker Zynga Inc. grapple with lower demand, putting more pressure on Facebook to increase advertising sales, Greenfield said. The social-networking company risks annoying its mobile customers by cluttering the service with ads, the analyst said.

Shares of the Menlo Park, California-based company declined after Greenfield changed his recommendation from neutral. The analyst lowered his 2012 and 2013 revenue forecasts, as well as his estimate for earnings before interest, taxes, depreciation and amortization to $3.05 billion. Analysts predict about $3.5 billion, the average of estimates compiled by Bloomberg.

Much of the performance of mobile ads is driven by accidental clicks, or “fat fingers,” according to Greenfield.

“It feels like Facebook is pushing advertising monetization harder than they should be, which we believe will harm user engagement in 2013 and beyond,” Greenfield, who has a target price of $16 on Facebook shares, wrote in a report.

Facebook fell 2.4 percent to $20.40 at the close in New York, the lowest level in 1 1/2 week.

Greenfield, a former Goldman Sachs Group Inc. analyst, rated Facebook shares neutral after they sold for $38 in the May initial public offering. At the time, seven financial firms recommended the stock and three rated it a sell, according to data compiled by Bloomberg. The stock has slumped 46 percent since its debut.

JPMorgan Chase & Co. and Morgan Stanley cut their price targets for Facebook last week, citing lower expectations for revenue from the site’s payments business after Zynga cut forecasts.

To contact the reporters on this story: Tom Keene in New York at tkeene@bloomberg.net; Ryan Faughnder in New York at rfaughnder@bloomberg.net

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net

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