Facebook ‘Close to Being Extremely Attractive’: Pro
A day after the expiration of Facebook’s initial lock-up period, one analyst said the stock is “very close to being extremely attractive,” despite plunging roughly 50 percent since its $38 offering price in May.
The social network’s stock — already under intense selling pressure — inaugurated its post-lockup period by plunging to a new all-time low on heavy volume. Some see the rout as overdone, however.
“We believe that the lock-ups caused a bit of a sell-off,” said Rick Summer, an analyst at Morningstar, in what he described as somewhat of a self-fulfilling prophesy.
Another 1.2 billion of the social-networking giant’s shares are set to become available for public trading in November.
“There’s obviously the potential for another leg down here,” Summer said on CNBC’s“Squawk on the Street.” “You see a lot of float [the amount of stock available for trade] that’s going to come out. Particularly in that November lock-up, we’re looking at about a billion shares come out.”
Although Summer cautioned investors to expect some near-term volatility, Facebook stock currently trades at a roughly 40 percent discount to what he thinks it is currently worth. Summer has a $32 price target on the stock.
A key headwind for the company’s stock price is the concern among investors about its lagging mobile revenue growth.
In a recent interview with CNBC,CFO David Ebersman stressed that the company’s mobile revenue was still in the “early days.”
“As that mobility starts to look stronger, we really believe that the competitive advantages for Facebook are going to start to make people be a lot more optimistic in that story,” he said.
Many companies have been “hammered” by their inability to monetize mobile, Summer said. Still, he thinks Facebook will be able to rise above the challenge, along with a couple other names like Google and Apple, that will go on to become giants in mobility. (Read More: Apple Leads Amazon in Mobile Commerce Race.)
“Clearly, we believe Goole is,” he said about the list of future giants in mobility. “Clearly, we believe Apple is. But we actually believe Facebook has some very strong competitive advantages there.”
Given Facebook’s growth prospects, Summer sees its revenue tripling over the next four years, and said he thinks the company warrants “reasonably rich” multiples on its stock.
— By CNBC.com’s Katie Little; Follow Her on Twitter @katie_little.
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Disclosure information was not available for Rick Summer.