A dozen Facebook analysts—whose firms took the social network public 40 days ago—believe it will be another 12 months until the beaten-down stock gets back to its $38 IPO price.
Following a mandated quiet period, twelve analysts put out reports to clients on Facebook Wednesday with an average 12-month price target of $38 on the nose. The shares are trading off 13 percent from that initial offering price.
“I guess the analysts with ‘buys’ are pleased the stock broke issue otherwise there would likely be no ‘buy’ recommendations today,” said Stephen Weiss of Short Hills Capital. “In fact, there likely would have been a few ‘sell’ recommendations—although that of course would not have happened.”
Probably most thankful is Scott Devitt of Morgan Stanley , the lead underwriter of the IPO. Devitt put an “overweight” rating on the stock with a—you guessed it—$38 price target.
Morgan Stanley took heat amid the new stock’s plunge after it was reported that Devitt had cut his revenue estimates ahead of the offering, yet the investment bank still revised upward the IPO price range and priced it at the high end of that new range.
Following the tech stock hype scandals a decade ago, a Chinese wall was placed between a firm’s investment banking arm and its research unit. Still, with reports saying Devitt’s estimate cut had been communicated to major clients, it struck many as odd that Morgan Stanley’s bankers would push for the higher IPO price.
One could also look at Wednesday's tame recommendations as proof that the Chinese wall does work since the underwriters aren’t calling for monster gains in the stocks. Or they may have just taken the now mandated 40-day quiet period to reassess their initial analysis, especially with the luxury of seeing the stock plummet after the IPO.
“It is disappointing that the majority of the underwriters are assigning valuations little different from Facebook's IPO price,” said Jason Raznick, director of Benzinga.com, a site specializing in tracking the latest market-moving events in real-time, like analyst calls. “These banks may have gotten caught up in the Facebook hype themselves.”
The most bullish call Wednesday from an underwriter firm came from JPMorgan , whose Doug Anmuth put a $45 price target on the stock and wrote, “as the underlying social fabric of the Web, Facebook is a unique platform asset with strong network effects, a deep competitive moat, and unparalleled social context.”
BMO Capital put the lowest price target on Facebook from an underwriter firm at $25. The analyst, Daniel Salmon, listed a number of concerns in his report, including mobile monetization and slowing user growth.
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