NEW YORK – The Wall Street analysts who know Facebook best are giving the company’s stock a mixed review. Think: like, not love.
A flood of analyst reports from 33 banks gave Facebook’s stock a mix of “Neutral” and “Buy” ratings Wednesday. And there was one review that equated to a “Sell” rating.
It marked the end of the 40-day quiet period after Facebook’s initial public offering. Analysts at banks that led the IPO were finally allowed to give public opinions on the stock, offering the first glimpse of what the IPO’s underwriters really think about Facebook.
Facebook’s much-ballyhooed IPO landed with a thud May 18, with the stock closing just 23 cents above its $38 IPO price. It hasn’t fared much better since. On Wednesday, it fell $87 cents, or 2.6 percent, to close at $32.23.
Morgan Stanley, the lead bank in the IPO, gave a $38 target price for Facebook’s stock over the next 12 months. That’s the same as the IPO price Facebook has failed to match since its first day of trading. The analyst, Scott Devitt, said Facebook has long-term opportunities in mobile advertising despite recent concerns.
“The mobile ad market remains in its infancy – while we believe Facebook will lead the market in mobile ad targeting, agency and brand transitions to mobile may take longer than expected,” Devitt wrote.
Facebook derives the bulk of its revenue from advertising on its website, and while it has been testing mobile ad products, it warned before its IPO that its mobile users are growing at a faster rate than the revenue that it’s making from them. The disclosure spooked some investors ahead of the company’s initial public offering last month, and likely contributed to the stock’s lukewarm reception.
William Blair’s Ralph Schackart also gave the stock an “Outperform” rating, and said Facebook is “becoming a daily utility,” making it difficult for people to switch to a different platform.
Mark S. Mahaney of Citi Investment Research also called Facebook an Internet utility, comparing it with the likes of Amazon.com Inc. and Google Inc. Facebook, he noted, will soon reach 1 billion monthly users and 600 million daily average users.
“By any comparison, these are startlingly impressive metrics,” wrote Mahaney in a note to investors. Nonetheless, Mahaney put a “Neutral” rating on Facebook’s stock, calling the company’s dual-class stock structure one of the biggest investment risks.
