After surging last week to a recent high of above $23 a share from its all-time low of $17.55, it looked like Facebook investors finally had reason to celebrate. But on Monday, the battered stock took another hit thanks to an article in the financial magazine “Barron’s” which claimed it’s “still too pricey.” The assertion sparked a 9.6 percent decrease in stock value down to $20.66 in afternoon trading. The plunge triggered the NASDAQ exchange’s “circuit breaker” designed to prevent over-zealous short sellers from further destroying a company’s book value. It appears that Facebook’s challenge to make the shift to mobile web is still driving down its stock price, thus, until it can solve this problem it may continue to display volatility.
“What are the shares worth? Perhaps only $15,” was the comment in a “Barron’s article” this weekend.
Though there wasn’t much new in the article, the author noted Facebook’s well-chronicled troubles, particularly its challenge making money from the shift to mobile web browsing.
It seems the information may still be shocking to the broader investing public to see just how much more expensive Facebook is than Google and Apple. At $23, Facebook is trading at 47 times its projected 2012 profit. Both Google and Apple only trade for 16 times 2012 earnings.
“Barron’s” analyst Andrew Barry, whose Saturday article contributed to the circuit-breaking slide, suggests that “The rapid shift in Facebook’s user base to mobile platforms – more than half of users now access the site on smartphones and tablets – appears to have caught the company by surprise.”
From his point of view – and traders seem to agree – Zuckerberg and Co. need to figure out how to transition the money-making ad presentations of the social networking site from PCs to smartphones and tablet. And fast.
As of Monday morning, though, the market doesn’t appear to have the patience to wait. And to add insult to injury, Facebook now joins another woefully disappointing company, Groupon, whose share price tripped NASDAQ’s circuit breaker one week ago today.
The NASDAQ circuit breaker – painfully explained in a 334-page SEC ruling – is designed, in summary, to “prevent short selling, including potentially manipulative or abusive short selling, from driving down further the price of a security that has already experienced a significant intraday price decline” of 10 per cent.