Today was another terrible day for Facebook’s stock price. As of 12 noon, the stock had fallen 4.54% to a new low of $22.07, almost 50% of the initial offering price of $38.00.
While most analysts have moved Facebook’s stock to the ‘Buy’ or ‘Hold’ category, no one is entirely sure of how low the stock price will go.
A major problem is that lockdown dates for many large shareholders begin to expire in August and millions of shares will soon be flooding the market. This is bound to depress the stock price further.
Some analysts are urging potential investors to look beyond the short term for Facebook, noting the almost 900 million users of the web site and growth outside the U.S.
Personally, I believe that Facebook was clearly overpriced at $38.00 and it has another strong negative in addition to the millions of shares that employees and investors will be unloading shortly.
This negative is how poorly Facebook compares to Google in advertising effectiveness. Here, there is no contest, Google wins hands down. Therefore, it is not clear to me how advertising will turn into a major source of revenue for Facebook in the long term.
What do you think?