Facebook Takes Three Analyst Downgrades

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Published: January 31, 2013 8:13 am

Last Updated: January 31, 2013 8:28 am

Facebook Inc. (NASDAQ: FB) saw its earnings and sales come in above expectations on Wednesday after the close. What investors are focusing on still is that mobile usage is growing rapidly and margins have compressed sharply. While some of the margin compression is due to more employees and due to charges around options and other one-time issues, longer-term worries remain about the business cannibalization from mobile users versus desktop users. Analysts have responded and we have seen three downgrades so far.

Facebook shares were cut to Neutral from Buy with a $30 price target at Citigroup. They were cut to Market Perform from Outperform with a $32 price target at BMO Capital Markets. And Stifel Financial cut the rating to Hold from Buy.

At least one firm stood out. A boutique named Pivotal Research has raised shares to Buy from Hold, but this firm is not exactly a household name for investors.

Credit Suisse maintained a Neutral rating and lowered estimates. It said, “While the 4Q12 results were generally solid and our bias remains positive given the company’s unique position to capitalize on the continued movement of brand advertising dollars online, we continue to believe that the shares are already reflecting the near-medium term benefits of both mobile monetization as well as FBX, and therefore maintain our Neutral rating.”

As far as the consensus is concerned, the mean price target from 27 brokerage firms is $33.93, according to Thomson Reuters. This stock now trades at about 45-times the expected 2013 earnings per share and trades at about 9.75-times its expected 2013 sales estimates.

Facebook shares are down close to 6% at $29.42 on Thursday morning, and yesterday’s closing market value at $31.24 was listed as $67.7 billion. Its post IPO range has been $17.55 to $45.00.

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