Facebook Hits Record Low After Bernstein Questions Stock
Facebook Inc. (FB), the world’s biggest social-networking company, tumbled to a record low after Sanford C. Bernstein & Co. initiated coverage with an underperform rating and a $25 target price.
The shares fell 3 percent to $26.90 at the close in New York, the lowest price since the stock began trading at $38 on May 18. The stock has lost 29 percent since the IPO.
“It is difficult to argue for owning the stock today,” said Carlos Kirjner, an analyst at Bernstein in New York, in a research report today.
At the time of its initial public offering, underwriters led by Morgan Stanley set a price that valued Facebook at 107 times reported earnings in the past 12 months, more than every Standard & Poor’s 500 stock except two. Facebook and Morgan Stanley have faced criticism for increasing the number of shares to be sold in the IPO by 25 percent to 421.2 million days before the offering and pushing up the asking price.
Facebook’s gains in advertising, which drives a majority of its revenue, aren’t keeping pace with growth in its user base as more members access the site through handheld devices. The Menlo Park, California-based company only recently introduced an advertising service for mobile users, and the platform hasn’t yet generated meaningful revenue, Facebook said last month.
A near-term slowdown in sales growth will fuel investor concerns about full-year 2013 sales, Kirjner said. The deceleration may “prove to be a temporary setback if, over time, Facebook manages to improve monetization of its inventory, both PC- and mobile-based, and maximize the value of social advertising,” Kirjner said.
Facebook is exploring ways to let children under 13 onto its social network, a person with knowledge of the matter said, a move that would expand its user base while inviting more scrutiny over privacy and security.
The Menlo Park, California-based company hasn’t made a final decision on whether or how to give access to children younger than 13 years old, said the person, who asked not to be identified because the discussions are private.
“Facebook is trying to use children to desperately boost its ad revenues now that it’s gone public,” said Jeff Chester, executive director of the Center for Digital Democracy, a Washington-based privacy group.
Many children are already accessing the site, and Facebook said in a statement that it’s looking for ways to help keep young kids safe while on social networks.
“Many recent reports have highlighted just how difficult it is to enforce age restrictions on the Internet, especially when parents want their children to access online content and services,” Facebook said in an e-mailed statement. “We are in continuous dialogue with stakeholders, regulators and other policymakers about how best to help parents keep their kids safe in an evolving online environment.”
The Wall Street Journal reported on the plans earlier.
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