Facebook stock price little changed: FB lawsuits add to IPO troubles

Facebook stock price remains little changed after sharply going. Meanwhile Facebook (FB) lawsuits have added to its IPO troubles
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Facebook stock price went up a bit yesterday. But no one is sure of its prospects in the long term. A Market Watch report has predicted that Facebook share prices may settle at around $13. If this is the case there is no real hope to see FB stocks rebound. And if that happens, it will drag the whole Wall Street.

In yesterday’s trading Facebook (FB) went up slightly and closed at $33.03, a gain of $1.03 or 3.22 percent. But experts are of the view that if someone thought FB stocks were headed upwards, he is definitely mistaken.  A report in a very respectable Market Watch has this to say about the prospects of Facebook stock, “Assuming that its five-year return is equal to the stock market’s long-term average return of 11% annualized, Facebook shares currently would need to be trading at just $13.80”.

So if you are willing to take the bait at the Facebook’s current stock prices right now, give it a second thought. A longtime Wall Street analyst has this to say, “At .43 cents earnings, they shouldn’t had so many shares, and asked for that high of a share price. They are acting like they are as relevant and almost as valuable as Apple? Come on. Please. One company sells products at an exponential growth rates with profits hardly ever seen before in a mature company”.  She goes on to add, “Facebook is just offering a service that is more of a novelty. In order for Facebook to prove its value, they would have to charge users a minimum of $5 a month and be able to retain them and still grow at an exponential growth rate. Their service is only relevant to mostly kids under 21, that’s the bulk of their user base. I see their stock value at more like $7 a share, so it will trade at a P/E of less than 20”.

Meanwhile the Market Watch report while detailing as to why there is not much hope for Facebook at the Wall Street, it says, “The researchers found that the revenue of the average company going public between 1996 and 2010 grew by 212% over the five years after its IPO. Assuming Facebook’s revenue grows just as fast, and given that the company’s latest-year revenue was $3.71 billion, its annual revenue in five years’ time will be $11.58 billion”.

Another report by Wall street Journal says that historically too, Facebook has been the worst performing big IPO in the US market. “There have been 23 U.S. IPOs over that size since 2007.  Through the first three sessions, only asset-manager Och-Ziff Capital performed as poorly, losing 13% as well, according  to Dealogic. In fact, only seven of the deals ended their first three sessions in the red, the data provider says”, the Wall Street Journal report says.

Facebook is also looking at prospects of more and more lawsuits filed against it in different courts across the US. There are reports that Facebook’s leading underwriter Morgan Stanley didn’t disclose the latest financial prospects of Facebook to all the customers. There was sudden caution very close to the huge initial public offering, and while an investor roadshow was underway, was a big shock to some. But this forecast was not revealed to all the perspective investors.

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Posted by admin on May 25, 2012. Filed under Business. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry