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Why Facebook, Inc. Shares Might Fall Back

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While Fools should generally take the opinion of Wall Street with a grain of salt, it's not a bad idea to take a look at particularly stock-shaking analyst upgrades and downgrades -- just in case their reasoning behind the call makes sense.

What: Shares of Facebook, Inc.  (NASDAQ: FB  ) slipped 1% on Monday after Argus downgraded the social-networking gorilla from buy to hold.

So what: Along with the downgrade, analyst Joseph Bonner removed his price target of $71, an indication that he sees limited upside for Facebook shares in 2014. So while momentum traders might be attracted the stock's strength in recent months, Bonner's call suggests growing sentiment on Wall Street that the valuation is becoming a bit stretched.

Now what: According to Argus, Facebook's near-term risk/reward trade-off is pretty balanced at this point. "[W]e believe that management is again emphasizing long term growth in the user base over the immediate monetization of existing services," said Bonner. "This shift in emphasis is exemplified by the company's plan to shelter WhatsApp in order to build the user base, rather than quickly monetizing the service in the manner of some competitors. We are concerned about the impact of this strategy shift and the risks of the WhatsApp acquisition." Given Argus' still-very bullish view of Facebook's five-year appreciation potential, however, long-term investors would do well to take today's downgrade with a grain of salt.

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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.

  • Report this Comment On March 17, 2014, at 2:45 PM, Understand29 wrote:

    Telling me the stock MAY go down is not telling me anything. That is equivalent to me saying the sun may or may not come out today. Or if I don't look both ways, I MAY get hit by a vehicle. However, telling me that the stock WILL go down and having a reason has way more authority and shows your confidence in your thoughts. Just my 2 cents.

  • Report this Comment On March 17, 2014, at 6:44 PM, Vismxr wrote:

    In 20 years Zuck will be same age as Bezos. I wonder what the future holds with his vision in 2034?

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Brian Pacampara

I take a look at big 10% moves, as well as stock-shaking analyst calls, on a daily basis for The Fool. While I don't believe in active trading, closely monitoring Mr. Market's mood swings can help identify long-term opportunities.

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9/2/2015 3:59 PM
FB $89.89 Down +0.00 +0.00%
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