Facebook’s Market Value Now $50 Billion Below IPO Estimate

Facebook shares fell to a record low on Tuesday after several analysts, including those at Morgan Stanley, the lead underwriter of the company’s initial public offering, cut their price targets on the stock – citing reductions in the social network’s revenue projections.

Facebook shares fell to a record low on Tuesday after several analysts, including those at Morgan Stanley, the lead underwriter of the company’s initial public offering, cut their price targets on the stock – citing reductions in the social network’s revenue projections.

According to the Wall Street Journal, Facebook shares fell by nearly 2 percent to $17.73 before Wall Street closed on Tuesday, meaning that the company has lost $50 billion in market value since its IPO in May this year; while some fear that the stock is nowhere near its bottom.

Scott Devitt, an analyst with Morgan Stanley, said that the company’s shares may fall as low as $17, though his price target for the company was still at $32 – a 16 percent decline from his initial $38 prediction.

Doug Anmuth, an analyst with J.P. Morgan Chase, another Facebook underwriter, too cut his price target for Facebook – this time by 33 percent from $45 to $30.

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Both analysts say that Facebook was finding it harder than it previously thought to reach mobile users with ads.

As more users access Facebook’s site over smartphones and tablets, they’re exposed to fewer ads, Devitt said in a note to clients on Tuesday.

Additionally, Anmuth believes that the company may not be able to make as much money from online games as they had previously thought.

[quote]“The dynamics around social gaming have changed, leading to lower monetization for Facebook,” Anmuth said in a note. “Web games now operate in a more competitive space, and users are rapidly shifting to mobile devices where Apple and Google control app distribution and payments.”[/quote]

Late Tuesday, Facebook’s co-founder and CEO Mark Zuckerberg announced that he would not be selling off his shares for at least a year, despite sales by other early investors including Peter Thiel and fellow co-founder Dustin Moskovitz.

The news brought some cheer to the company’s share price as it rebounded by 2 percent before the markets closed; while the company also announced a move almost tantamount to a share buyback, by deciding to withhold 101 million shares of the employee stock grants and pay its tax bill with cash on the balance sheet.

“The fact that they are using cash is a good thing. It feels like a mini buyback in a way because you’re in essence reducing your share count by 101 million shares,” said Susquehanna Financial Group analyst Herman Leung to Reuters.

“These are the kinds of things they can do until the figure out how to better monetize the sites, to help alleviate some of the pressure on the stock,” added Baird & Co analyst Colin Sebastian.

[quote]”Coming out and showing that they’re being a little more active in supporting the stock is good for investors,” he added.[/quote]

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