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Tuesday, 25 September 2012 08:16

Facebook stock takes a nosedive, again

Written by Peter Scott



Barron’s reckons it’s still too pricey


Facebook just can’t catch a break. The company’s stock took a new hit Monday after Barron’s reported that it is still too pricey, something that the tech press has been saying for months.

Just three weeks ago FB was trading in the $17 to $19 range, but eventually it recovered and hit $23.29 last week. Even at that price it was down 39 percent from the IPO price of $38. However, on Monday the stock took a massive hit and dropped 9.1 percent to $20.79 and it seems to be headed toward teen territory once again.

Barron’s Andrew Bary pointed out that the stock still trades at high multiples of both sales and earnings and that the company has an uncertain outlook for business growth. In layman terms, Facebook is still overpriced. Bary believes Facebook’s stock is worth $15, which is still optimistic in our book. We estimate it will settle somewhat lower, around the $13 mark and even that is a stretch given Facebook’s P/E ratio and the number of new shares hitting the market.

More here.


Peter Scott

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