Valuations of social media companies require some foresight and forecasting, while much of Facebook’s monetization depends on its ability to generate a higher return on investment for advertisers and to boost user engagement.
“That's somewhat speculative and I think in this environment, given the botched IPO (initial public offering) of Facebook, investors don’t have much tolerance to wait and see and so the stock’s in a penalty box,” he said.
Additional overhangs for the social-networking giant include the impending lockup expiration of its shares and the lack of guidance that the company included in its first quarterlyearnings report.
This uncertainty has resulted in an unenviable position for Facebook in the minds of investors — that of a “show-me story,” Sebastian said.
— Written by CNBC's Katie Little. Follow her on Twitter @katie_little.
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Robert W. Baird makes a market in these securities and expects to receive or intends to seek investment banking-related compensation within the next three months.