Facebook tumbles on negative comments

Sep 24, 2012
Facebook's shares plunged nearly 11 percent Monday after an influential markets publication said the stock is only worth $15.

Facebook shares plunged nearly 11 percent Monday after an influential markets publication said the stock is only worth $15.

The shares dropped as low $20.36, sharply down from Friday's close of $22.86, before paring losses in afternoon trade.

The fall came after Barron's, the markets-focused newspaper and website, published a story saying the world's largest company was still sharply overvalued despite trading at just over half of its initial price.

"Facebook's 40 percent plunge from its price of $38 in May has millions of investors asking a single question: Is the stock a buy?" Barron's said.

"The short answer is 'No.'"

"What are the shares worth? Perhaps only $15," Barron's said, adding that even at that level they are "no bargain."

The shares were still above their post-IPO low of $17.55. But analysts have warned that on October 29 a huge new supply of shares from company employees, up to now prohibited from selling their holdings, could flood the market, putting more downward pressure on the price.

Addressing the IPO flop for the first time, on September 11 Facebook founder Mark Zuckerberg said: "The performance of the stock has obviously been disappointing and we care about our shareholders."

However, he assured that over time, "we're going to be making more money on mobile than we make on desktop."

But Barron's argued that the company was behind on addressing the challenge of getting from people using Facebook on their smartphones.

Moreover, it said, even at $15, the company would trade at a price-earnings multiple of 24 times expected 2013 earnings.

By comparison, two other tech giants, Apple and Google, trade at roughly 16 times this year's earnings.

But as Facebook sank Monday, shares rose more than 2.1 percent to a record high of just under $750 a share.

Explore further: Barnes & Noble to keep Nook digital business after all

add to favorites email to friend print save as pdf

Related Stories

Alibaba: SEC seeking information on fight over fake goods

Feb 14, 2015

E-commerce giant Alibaba said Friday that U.S. regulators have requested information on Chinese authorities' allegations that the company has failed to do enough to prevent fake goods from being sold on its websites.

Recommended for you

Stock market shrugs off net neutrality vote

9 hours ago

(AP)—The stock market largely shrugged off the Federal Communications Commission's vote to impose tougher rules on broadband providers like Comcast, Verizon and AT&T to prevent them from creating paid fast lanes for the ...

Judge orders suspension of WhatsApp in Brazil

21 hours ago

(AP)—A judge says he has ordered the suspension of the globally popular instant messaging system WhatsApp across Brazil because it has allegedly failed to help in an investigation.

User comments : 0

Please sign in to add a comment. Registration is free, and takes less than a minute. Read more

Click here to reset your password.
Sign in to get notified via email when new comments are made.