Bernstein Research Carlos Kirjner is out with an unflattering upgrade of Facebook today. The Bernstein bear upgraded the stock from "underperform" to "market perform," but that's essentially a neutral rating. Given the sharp drop in the stock since its May IPO at $38, Kirjner is lowering his price target from $25 to $23, while suggesting that the company may be worth just $19 a stub right now.
The $19 price is based on adding Facebook's bountiful cash balance to 10 times his estimates for the company's 2014 EBITDA. The bump from $19 today to his $23 price target in the future is based on the upside potential of catalysts beyond the company's current display-advertising stronghold. Along the way, he's also worried about what will happen in the coming months as lockup expirations expire and Facebook's float gets fatter.
There is no shortage of reasons to be bearish here, but that's also Facebook's biggest advantage right now. Folks are under the impression that Facebook only generates revenue on ad clicks, perhaps unaware of the Sponsored Stories goldmine that's generating roughly $1 million a day in revenue at this point.
At a time when worrywarts are concerned about Facebook's sluggish performance in Europe and about General Motors'
Was Facebook overvalued when it went public at a lofty $104 billion market cap? Absolutely. Is pegging Facebook's value at $19 -- coincidentally half of May's $38 IPO price -- now overdone on the bearish end of the spectrum? Probably.
As Facebook continues to get smarter and drum up new ways to monetize its magnetism and growing knowledge of its users, you don't want to be on the side that's betting against this busted IPO.
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