How the mighty fall. Facebook shares slumped
more than 4 per cent Friday to a new record low as analysts cut their
projections of the social networking giant's expected advertising
In midday trading shares of the company were hovering at around 18.20 dollars, less than half of the 38 dollars share price that Facebook commanded when it went public in its much-anticipated and record-breaking IPO in mid-May.
The new sell-off was sparked by analyst reports which pegged Facebook's advertising revenue this year at just over 5 billion dollars, down from earlier estimates of 6 billion dollars. Daniel Salmon of BMO Capital Markets Corp revised his price estimate for the shares from 25 dollars to 15 dollars.
Sales "haven't been growing as fast as we and others had expected," said Debra Aho Williamson, the analyst at EMarketer who issued the downgraded revenue forecast. "There is still hesitation about the effectiveness of the advertising, about how much the advertising is worth."
The company has seen slowing growth in the last three quarters, from 55 per cent in the fourth quarter of 2011 to 32 per cent in the second quarter of 2012.
Another negative driving down the company's stock is the number of new shares becoming available as early investors start to cash in on their shares as their lock up periods expires.
"Facebook has multiple lock-up expirations over the next year, and recent selling activity on the August lock-up suggests to us the risk of future selling pressure," wrote Bank of America's Justin Post.
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