Weil on Finance: Facebook Analysts Can’t Keep Up
Welcome back, View fans. Here's a look at what I've been reading this morning.
What would it take for Wall Street analysts to put sell ratings on Facebook?
Here's a great observation from Sarah Frier of Bloomberg News. The 32 percent surge in Facebook's stock price this year "has left the 49 analysts who cover Facebook in a bind -- while 38 of them recommend the company with the equivalent of a buy rating, 21 of the total now have share-price targets below where Facebook is trading, according to data compiled by Bloomberg. That translates to an average 12-month price target of $72.46 for Facebook, less than 1 percent above the company's closing price of $72.03 yesterday. With the stock advancing more rapidly than anticipated, the price targets -- many of which were calculated in 2014, with several dating back to last year -- would suggest that analysts on average see little upside to the stock." Then again, why would Wall Street analysts want to risk offending their contacts at Facebook by downgrading the stock? Or maybe they'll raise their price targets, although that could be hard to explain. Facebook trades for 122 times earnings.
Whacking your company's stock price is easy as talking to a reporter.
Just what we needed, another headline with a bad marijuana pun, like this one from Forbes: "The First Pot Stock Billionaire Says His Penny Stock Could Be A Little High." That's what Bart Mackay said in an interview about Cannavest, supposedly the "world's leading hemp-based investment company," of which he owns 15.7 million shares. The stock traded for $117 on Friday. After the article came out it fell 27 percent. But he's still a pot stock billionaire, and he seemed to be realistic about his fortune: "In my view, it's a paper valuation and certainly not something I can take to the bank. I went through the dot-com period, and there was a bubble that existed there. There is probably a bubble in this stock somewhere, or in this industry."
Felix Salmon of Reuters got an amazing quote from Leah McGrath Goodman in an interview about her article. (Give her points for candor.) "If I read my own story, it would not convince me," she said. "I would have a lot of questions." That's why Newsweek shouldn't have said on its cover that it had found "the mystery man behind the crypto-currency," as Ryan Chittum of Columbia Journalism Review points out.
And speaking of Bitcoin . . .
Here's a good Q&A on the subject by New York University finance professor Aswath Damodaran at his blog Musings on Markets. I like the title: "Bitcoin Q&A: Bubble or Breakthrough? Both! Cult or Currency? Both!"
Bondholders aren't big fans of activist shareholders .
And who can blame them? Activists often are clamoring for companies to lever up and pay out their cash through stock repurchases and dividends. Moody's Investors Service has officially declared in a report that "activism is rarely good for creditors." The Wall Street Journal points to Commonwealth REIT and Cliffs Natural Resources as examples of companies warning that the presence of activist shareholders could lead to downgrades of their credit ratings.
This has to be the world's ugliest cat .
It's called a Ukranian Levkoy. Click the link from Paw Nation if you dare: "The breed started to develop in 2000 in the Ukraine. The developer, Elena Biriukova, achieved the Levkoy's look by breeding hairless Donskoy Sphynx females and Scottish Fold males. Due to the natural dominant mutations of folded ears in the males and furless bodies in the females, the result of this pairing was a feline with inward folded ears and no hair."
(Jonathan Weil is a Bloomberg View columnist. Follow him on Twitter at @JonathanWeil.)
This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.
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