The market isn't buying the stock's $38 IPO price, pushing shares below $34 Monday. Where is this stock headed?
Facebook's (FB 0.00%) initial public offering was incredibly successful -- for the company and its early investors.
They breezed away Thursday with an IPO price of $38 a share. Was it too high? Definitely. But hey, Facebook hauled in $16 billion, and now has enough money to do and become just about anything it wants. Early investors like Goldman Sachs (GS 0.00%) also got a nice piece of the pie.
Those who bought into Facebook on Friday with dreams of big money, however, are left holding the bag.
They breezed away Thursday with an IPO price of $38 a share. Was it too high? Definitely. But hey, Facebook hauled in $16 billion, and now has enough money to do and become just about anything it wants. Early investors like Goldman Sachs (GS 0.00%) also got a nice piece of the pie.
Those who bought into Facebook on Friday with dreams of big money, however, are left holding the bag.
Facebook shares barely held on to the $38 support level Friday as the deal's underwriters presumably used all the tools at their disposal to prop up the share price. Throw in the various screwups from Nasdaq and, well, the words "faceplant," "facerip" and "IPOcalypse" are on the minds of some.
It looks like the underwriters gave up Monday, and Facebook shares dropped below $34 at various points throughout the day and closed at $34.03.
Now, the question on investors' minds is how low will the stock go? At the $34 price the stock hovered at Monday, it was trading at about 57 times projected earnings for the next year, according to FactSet research (and cited by The Wall Street Journal). Google (GOOG 0.00%) trades at about 14. Apple (AAPL 0.00%) trades at 10.3.
Former analyst Henry Blodget crunched the numbers in a very smart post and guessed that a fair price for Facebook would be between $16 and $24. Another analyst, Pivotal Research Group's Brian Wieser, gave the stock a $30 price target with a "sell" rating.
Other analysts were more positive, expecting the stock to grow in the future. Michael Pachter of Wedbush Securities put a $44 price target on the stock. A Susquehanna analyst picked $48.
Are those targets too optimistic? The stock has clearly lost all momentum, and probably won't gain back any juice until the company offers an impressive quarterly earnings report. But that may not happen anytime soon, as Facebook's user growth and advertising revenue growth are slowing. The company's capital costs are high, too, as it builds out data centers.
So where do you think Facebook shares are headed?
It looks like the underwriters gave up Monday, and Facebook shares dropped below $34 at various points throughout the day and closed at $34.03.
Now, the question on investors' minds is how low will the stock go? At the $34 price the stock hovered at Monday, it was trading at about 57 times projected earnings for the next year, according to FactSet research (and cited by The Wall Street Journal). Google (GOOG 0.00%) trades at about 14. Apple (AAPL 0.00%) trades at 10.3.
Former analyst Henry Blodget crunched the numbers in a very smart post and guessed that a fair price for Facebook would be between $16 and $24. Another analyst, Pivotal Research Group's Brian Wieser, gave the stock a $30 price target with a "sell" rating.
Other analysts were more positive, expecting the stock to grow in the future. Michael Pachter of Wedbush Securities put a $44 price target on the stock. A Susquehanna analyst picked $48.
Are those targets too optimistic? The stock has clearly lost all momentum, and probably won't gain back any juice until the company offers an impressive quarterly earnings report. But that may not happen anytime soon, as Facebook's user growth and advertising revenue growth are slowing. The company's capital costs are high, too, as it builds out data centers.
So where do you think Facebook shares are headed?
