Facebook Inc, the world’s biggest social-networking company, tumbled to a record intraday low after Sanford C Bernstein & Co initiated coverage with an underperform rating and a $25 target price.
The shares fell 3.4 per cent to $26.79 at 10:14 am in New York, and earlier touched $26.57, the lowest intraday price since the stock began trading at $38 on May 18.
“It is difficult to argue for owning the stock on Monday,” said Carlos Kirjner, an analyst at Bernstein in New York, in a research report on Monday.
At the time of its initial public offering, underwriters led by Morgan Stanley set a price that valued Facebook at 107 times reported earnings in the past 12 months, more than every Standard & Poor’s 500 stock except two. Facebook and Morgan Stanley have faced criticism for increasing the number of shares to be sold in the IPO by 25 per cent to 421.2 million days before the offering and pushing up the asking price.
Facebook’s gains in advertising, which drives a majority of its revenue, aren’t keeping pace with growth in its user base as more members access the site through handheld devices.
The Menlo Park, California-based company only recently introduced an advertising service for mobile users, and the platform hasn’t yet generated meaningful revenue, Facebook said last month.
A near-term slowdown in sales growth will fuel investor concerns about full-year 2013 sales, Kirjner said. The deceleration may “prove to be a temporary setback if, over time, Facebook manages to improve monetisation of its inventory, both PC- and mobile-based, and maximize the value of social advertising,” Kirjner said.
Facebook is developing tools to let children younger than 13 years old use the site with parental supervision, a move that may rekindle privacy concerns, the Wall Street Journal reported yesterday.
“Facebook is trying to use children to desperately boost its ad revenues now that it’s gone public,” said Jeff Chester, executive director of the Center for Digital Democracy, a Washington-based privacy group.
Andrew Noyes, a spokesman for Facebook, didn’t immediately return an e-mail seeking comment.