Is the share price of Facebook overvalued?
Mark Zuckerberg must have lost his interest in reading. The Facebook founder was only able to get out of the US magazine last week Forbes learned that he is the loser of the year on the list of 400 richest Americans. Zuckerberg is likely to have noticed for himself that his assets have shrunk significantly since the botched Facebook IPO. Worse, because it was more unexpected, Zuckerberg and his company might hit an article in the magazine Barron's from the weekend: With its cover story "Still too pricey", "Still too expensive", the influential investor magazine triggered a violent crash in Facebook shares.
"Should you buy the stock", asks the author of the article - and gives the answer himself: "No." As a result, the price of the Facebook papers rushed down on Monday. By the close of trading in New York, the stock lost more than nine percent to $ 20.79. That was the worst slump since going public in May.
Four months ago, Facebook started trading at $ 38. The previous hype was quickly followed by disillusionment, with the stock falling to $ 17.55 in the first few weeks. Already then had Barron's advised against a purchase. "Meet your friends on Facebook - but keep your hands off the stocks," wrote the magazine.
After the catastrophic stock market launch, Zuckerberg held back for a long time. Two weeks ago, however, he went on the offensive: he addressed the investors with a speech that was unusually long for his circumstances. The 28-year-old was disappointed with the poor performance on the trading floor - but at the same time he tried to win back the trust of investors with new visions and reassuring words. With success: the share price recovered slightly, the worst seemed to be over for now.
Facebook cannot compete in the mobile advertising market
Since then, not much has changed in the company's economic situation. The recent price slump shows once again what part psychology has played in the price development. And above all, it shows how fragile investors' confidence in the economic future of the social network is.
Barron's also considers the current - already low - price of the Facebook share to be completely overvalued.
But why? The social network has almost a billion members. However, that alone does not bring any money. Facebook has to assert itself on the advertising market against competitors such as Google or Apple. And this is exactly where the criticism comes in Barron's an: More and more Facebook users are using the social network via its app on a mobile device, writes the magazine. More than half of the members are now logging in using smartphones or tablets, and this trend will continue.
The company is not prepared for this. The advertising on traditional PCs, from which Facebook earns most of its money, is becoming less and less important. This realisation is not new. In his speech at the beginning of September, Zuckerberg had also admitted that his group had slept through the development of mobile devices so far. But they are now in the process of changing that, he promised. He did not name any concrete measures.
The problem with smartphone advertising: The small screens do not offer much space to place advertising without scaring off your own users. Here sees Barron's the competitors Apple and Google have an advantage. According to new analyzes by the marketing company EMarketer, Facebook only has a 2.8 percent share of the mobile advertising market in the US this year. A total of $ 2.6 billion can be fetched here. Market leader Google has a share of 55 percent.
Many analysts contradict Barron's forecast
Facebook rival shares - like Apple's - are currently moving in exactly the opposite direction. The Google share price reached a new all-time high on Monday, the shares rose to $ 750. The Apple shares that Barron's Incidentally, recommends that they briefly jumped the 700 mark at the start of sales of the new iPhone.
What is the Facebook share actually worth? "Maybe $ 15," the magazine said. The share has not yet fallen that low.
Barron's makes it clear in his article, however, that it is quite alone with its gloomy outlook. "Our prognosis is admittedly extraordinary," they say. Just one of nearly 40 Wall Street analysts who dealt with Facebook has a price target for the share of $ 15. Most would be around $ 30, and quite a few even speak of $ 40.
At least that is what Zuckerberg will be happy to read.
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