Why Facebook Shares Got Unfriended by Investors

Updated

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 (NAS: 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 byclicking here.

The article Why Facebook Shares Got Unfriended by Investors originally appeared on Fool.com.

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