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Facebook Stock Closes Down

Facebook Stock Closes Down

Facebook’s shares fell again Tuesday, as investors continued to question the stock’s valuation after Reuters reported that underwriters cut their revenue forecasts for the company before the IPO.
Facebook’s shares hit a low of $30.98 on Tuesday, 8.9 percent below Monday’s close, a loss of 18 percent from their $38 IPO price.
At the low, the stock had lost 30 percent from an intraday high of $45 hit shortly after trading started on Friday. More than 28 million shares had traded in early action on Tuesday, making it one of the most actively traded in U.S. markets.
Shares were recently at $31.75, down 6.7 percent on the day.
Facebook’s revenue growth has been slowing in recent quarters, raising flags among some who believe the company should show consistently strong revenue growth at this stage in its life.
The Menlo Park company surprised investors after disclosing, just days before the initial public offering, that its revenue may be hit by more users transitioning to mobile platforms, where advertising is less proven. That prompted the analyst at Morgan Stanley to surprisingly tell clients that he was cutting his revenue forecasts for the company.
The company’s current price still implies very high annual growth rates. Thomson Reuters Starmine, meanwhile, using expected growth rates of about 10.8 percent over the next decade, values the shares at $9.59, or less than one-third of its current price.


 

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