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
sales.
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.
