What Drove Facebook (Nasdaq: FB) Shares to a New Low

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New and Reduced Facebook Stock Targets
Due to the extra shares as well as concerns over Facebook’s declining ad revenue, analysts have been slashing FB price targets. Here are the latest lowered estimates:

• Bank of America/Merrill Lynch (NYSE: BAC) hacked its target price on FB stock to $23 from $35. BofA cautioned that Facebook will face further selling pressure as additional lockup periods expire. The firm also noted Facebook’s revenue will face increased risks as more users shift to mobile usage, an area where Facebook collects less revenue than it does from desktop users. A decline in social gaming and increased spending are also concerns.

  “Facebook has multiple lock-up expirations over the next year, and recent selling activity on the August lock-up suggests to us the risk of future selling pressure,” wrote BofA analyst Justin Post. Looking ahead to November’s lockup expiration, Post added, “We wouldn’t expect the stock to see buying momentum until December.”

  BofA maintains a “Neutral” rating (what some traders love to call a seven-letter word for “sell”) on Facebook.

• Stifel Nicolaus (NYSE: SF) was less generous and told investors that the firm would start taking notice of FB shares at the $16 level.

  “Although valuation appears tempting, the uncertainty of the earnings trajectory and increasing public float leaves us cautious,” Jordan Rohan of Stifel penned in a note to clients. While Rohan acknowledges Facebook’s platform “has huge potential” it still must overcome “significant” challenges with monetization.

  Stifel doesn’t have a price target on the stock and currently rates shares a “Hold.”

• The biggest bear of the bunch is Daniel Salmon of BMO Capital Markets. On Friday he reiterated his “Underperform” rating on Facebook shares and slashed his price target from $25 to $15. Salmon believes Wall Street revenue estimates may be too rich for the third quarter.

“Checks on paid media spending remain mixed: many conversations referenced a “pause’ in order to reevaluate earned/owned/paid mix and ROI (return on investment) measures,” Salmon wrote. He also noted that investor sentiment “is now much worse” than sentiment among advertisers for Facebook, but that the company’s business fundamentals will once again be the main focus “after the technical challenges presented by lock-up expirations over the next six months have been absorbed by the stock (possibly offset by some index buying at some point).”

Facebook stock gained nearly 5% by 11 a.m. to hit $18.55.

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