Can Facebook Unlock Value?
Facebookshares continue to fall to new lows Thursday after additional shares hit the market and increased the supply of an already unloved stock.
Up to 1.9 billion additional shares could hit the market Thursday, as the company’s early investors and some top executives become eligible to sell their shares. (Read More: Facebook Insiders Can Sell Stock as ‘Lock-Up’ Ends.)
“Until you have some additional certainty or some additional fundamental factors to point to, the stock will continue to trade on concerns about the increased float and the increased selling pressure,” JMP Securities analyst Mark Harding told CNBC’s “Squawk on the Street.”
With the markets a measure on supply and demand in the near-term, the incremental new supply of Facebook shares hitting the market is adding to the selling pressure. But Harding expects this to turn around once the fundamentals improve.
“Right now it’s trading about 32 times 2013 earnings, so it is rather expensive when you take a look at perhaps some of the other companies, but I think the important thing here is you’re not actually seeing any mobile contributions in those assumptions,” Harding said.
Morningstar’s Rick Summer is also concerned about the fundamentals. “We see decelerating growth," he said. “We see contracting profit margins. They're going to have to invest. Until mobile starts to materialize to be very meaningful to the company — and we look to another three to four quarters for that to occur — we’re going to still see headwinds.” (Read More: Facebook’s Earnings Call: Zuckerberg & Team Stress Mobile.)
For Summer, this is a long-term story and the question is whether investors try to get in ahead of those trends turning. “Five years from now, we’ll be talking about a very different story, Summer said. “Facebook will be a dominant advertising company in our view and still quite profitable.”
—By Justin Menza, Special to CNBC.com
Additional News: So Who’s Bought Into Facebook?
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JMP currently makes a market in Facebook securities.