Facebook keeps Wall Street divided
SAN FRANCISCO (MarketWatch) --
Investors sent Facebook's (FB) shares down more than 15% Friday morning to $22.77 -- a new low for the stock that went public in mid-May at $38.
The drop came after the company reported second-quarter results on Thursday afternoon. Facebook swung to an operating loss for the period, though adjusted earnings and revenue came in line with analysts' estimates.
Facebook also did not give a forecast for the current quarter, but said it plans to increase spending through the rest of the year to hire "top talent" and continue to build the business. Read full story on Facebook's results.
Analysts maintained their ratings on the stock. Of the 36 brokers covering Facebook, 17 rate the shares as a buy while another 17 maintain neutral ratings, according to Thomson Reuters. Two carry sell calls on the shares.
"While the last bastion of hype and retail investor hope for upside may wash out of the stock in the next few weeks, institutional investors may not develop a sense of urgency to buy the shares in front of significant shareholder lock-up expirations," wrote Jordan Rohan of Stifel Nicolaus, who rates the stock as a hold.
The lock-up expirations refer to more than 460 million Facebook shares that become available for sale before the end of the year, with more to come next year, according to the company's prospectus.
Doug Anmuth, who maintains an overweight, or buy, rating on the shares believes concerns about the lockup expirations are a major reason for the stock's performance.
"We recognize that Facebook shares movements could disconnect from operating performance in the near term as lock-up expirations become a focal point for many investors, but we believe Facebook is in the early stages of an important transition in its advertising business that should drive accelerating growth and margin expansion over time," he wrote.
Goldman Sachs analysts Heather Bellini also stayed bullish on the shares following the results, writing that the report "makes us more positively predisposed on the company's advertising opportunity and reaffirms our view that Facebook will be a leading beneficiary of #TheIntelligentWeb."
Anthony DiClemente of Barclays kept his equal-weight rating on the shares, but lowered his price target to $31 from $35.
In a report, DiClemente wrote that ad pricing growth beat his expectations, but that volume growth decelerated, given the company's shift to moving ads over mobile devices.
"It is very early days on deciphering the impact of how these ad products will affect the Facebook ad revenue trajectory," he wrote.
Facebook spent most of its earnings call Thursday discussing its efforts to improve its advertising business, over the desktop as well as mobile platforms. CEO Mark Zuckerberg the company "is beginning to demonstrate that we can advertise effectively within the mobile experience" with initiatives such as sponsored stories.
Carlos Kirjner of Bernstein rates Facebook as an underperform, with a $25 price target. In his note, he writes that it is too early to tell how Facebook's efforts in this area are going to play out, and there questions about the effectiveness of its advertising offerings.
"We acknowledge the vast (but highly uncertain and possibly long term) upside potential that Facebook's assets create, but continue to view Facebook, for the time being, as a display advertising property until some evidence of the upside is apparent," Kirjner wrote.