Why Facebook Shares Got Unfriended by Investors

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Facebook (Nasdaq: FB  ) are getting unfriended by investors today, down by as much as 10%, after Barron's ran an article over the weekend calling the company overvalued.

So what: The report pegs Facebook's value at just $15, which doesn't appear to be derived from any model or estimates. Rather, the report just guesses that "perhaps only $15" is the right price. The article compares Facebook by traditional valuation metrics to much more mature peers like Apple and Google, saying those companies offer more compelling value.

Now what: Facebook is also very generous with stock-based compensation, which allows the company to partially veil those expenses by using non-GAAP figures that the Street focuses on. Mobile monetization is very much up in the air at this point for Facebook, and the report has little to no confidence that Mark Zuckerberg will be able to navigate that transition. Within the next couple months, Facebook will also see lockup expirations on shares following the IPO, which may add additional selling pressure on shares.

Interested in more info on Facebook? Add it to your watchlist by clicking here.

Fool contributor Evan Niu owns shares of Apple, but he holds no other position in any company mentioned. Click here to see his holdings and a short bio. The Motley Fool owns shares of Apple, Google, and Facebook. Motley Fool newsletter services have recommended buying shares of Google, Apple, and Facebook. Motley Fool newsletter services have recommended creating a bull call spread position in Apple. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.


Read/Post Comments (0) | Recommend This Article (2)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2029460, ~/Articles/ArticleHandler.aspx, 10/24/2014 5:33:35 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement