News Column

Facebook Does Faceplant Despite Market Rally

April 25, 2013

Facebook has been trying to save face from its dismal initial public offering last May. But the progress has come in fits and starts.

Late last year, Facebook's shares were springing back to life. Shares got up to nearly $33 in January, the highest point since the stock peaked after the IPO, when the shares were priced at $38. Investors liked the company's apparent traction in mobile advertising.

Shares of the No. 1 social-networking site, though, are down 2% this year, a far cry from the 11% gain by the less risky Standard & Poor's 500 index. Such lackluster performance amid a powerful rally isn't what investors thought they'd get by signing up for an emerging company. So far, Facebook hasn't given investors any reason to think it's worth substantially more than its already lofty valuation. Investors are paying roughly $26 a share for the company, which earned 2 cents a share over the past 12 months. That works out to a price-to-earnings ratio of about 1,300.

The company does have interesting prospects in mobile, including its customization to the Android operating system. Revenue is expected to jump more than 30% this year. Still, investors want to see more hard evidence of progress.

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Source: Copyright USA TODAY 2013

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