Over the past several days, the Facebook stock price has done a stark about-face.
In fact, Facebook (Nasdaq: FB) shareholders just might get the pop in price they have been hoping for ever since the social media giant debuted May 18.
Worries that Facebook's shares were overvalued and concerns that the company would not be able to grow revenue fast enough had pummeled shares lower by as much as 32% from the May 18 IPO price of $38.
After a disastrous IPO and a dismal showing in the weeks that followed, shares of Facebook are finally showing real signs of life. The tide may be turning.
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Why the Facebook Stock Price is Up
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Will the Facebook Stock Price Overcome This Latest Concern?
Facebook (Nasdaq: FB) and its struggling stock price have been in the spotlight since the company's IPO, but rarely for good news. This week started no differently.
Besides its poor stock performance, Facebook already has been blamed for halting this year's IPO market. There hasn't been an IPO since Facebook debuted on May 17.
Facebook also is taking heat for wreaking havoc on Nasdaq's reputation after technical glitches marred Facebook's debut. Nasdaq revealed last week that it will pay out $40 million in compensation damages to brokerages that lost money during the IPO fiasco.
Finally, many investors claim they were misinformed on Facebook stock's first-day potential, and have initiated a class action lawsuit against the underwriters.
Now the most recent bad news has cast even more doubts over whether or not Facebook can perform as well as investors expected.
Citing market research firm comScore Inc. (Nasdaq: SCOR), the report indicated unique visitors to the Facebook Website in the United States increased just 5% in April from a year earlier.
That was the lowest U.S. user growth rate since comScore started tracking the data in 2008. It compared very poorly to the data from the past two years, down from 24% growth in April 2011 and 89% in April 2010.
The amount of time Facebook users spend per month on the site increased, but also at a slower rate than before. Facebook users' time-on-site was up 16% from a year earlier, compared to a 23% increase in 2011 and 57% in 2010, according to comScore.
"The assumption that Facebook can maintain the 100% growth it reported Q2 2011 is no more plausible than the 45% growth it reported [earlier this year," said Money Morning Chief Investment Strategist Keith Fitz-Gerald after the stock started trading in May. "Google couldn't. Apple couldn't. And both of them are real businesses."
It may be a matter of numbers limiting Facebook's growth rather than a changed perception or heightened dislike of the company. Facebook is estimated to have already captured 71% of the 221 million U.S. Internet users, leaving little room for U.S. growth.
That is troubling as the U.S. accounts for approximately 56% of Facebook's 2011 ad revenue of $3.1 billion, according to the company's regulatory filings.
Morningstar analyst Rick Summer stated that Facebook cannot expect to have the same post-IPO growth as Google Inc. (Nasdaq: GOOG), due to the fact that Facebook already has a dominant market share of its industry and a very high number of Internet users.
Summer suggested that increased ad pricing could drive future growth.
"Facebook is already a dominant Web platform and they've got significant Internet penetration today," said Summer. "Ad pricing is clearly going to be where their growth is going to come from."
Besides its poor stock performance, Facebook already has been blamed for halting this year's IPO market. There hasn't been an IPO since Facebook debuted on May 17.
Facebook also is taking heat for wreaking havoc on Nasdaq's reputation after technical glitches marred Facebook's debut. Nasdaq revealed last week that it will pay out $40 million in compensation damages to brokerages that lost money during the IPO fiasco.
Finally, many investors claim they were misinformed on Facebook stock's first-day potential, and have initiated a class action lawsuit against the underwriters.
Now the most recent bad news has cast even more doubts over whether or not Facebook can perform as well as investors expected.
Has Facebook's Growth Reached a Ceiling?
Over the weekend The Wall Street Journal ran a report on Facebook's growth slowdown, especially in the United States.Citing market research firm comScore Inc. (Nasdaq: SCOR), the report indicated unique visitors to the Facebook Website in the United States increased just 5% in April from a year earlier.
That was the lowest U.S. user growth rate since comScore started tracking the data in 2008. It compared very poorly to the data from the past two years, down from 24% growth in April 2011 and 89% in April 2010.
The amount of time Facebook users spend per month on the site increased, but also at a slower rate than before. Facebook users' time-on-site was up 16% from a year earlier, compared to a 23% increase in 2011 and 57% in 2010, according to comScore.
"The assumption that Facebook can maintain the 100% growth it reported Q2 2011 is no more plausible than the 45% growth it reported [earlier this year," said Money Morning Chief Investment Strategist Keith Fitz-Gerald after the stock started trading in May. "Google couldn't. Apple couldn't. And both of them are real businesses."
It may be a matter of numbers limiting Facebook's growth rather than a changed perception or heightened dislike of the company. Facebook is estimated to have already captured 71% of the 221 million U.S. Internet users, leaving little room for U.S. growth.
That is troubling as the U.S. accounts for approximately 56% of Facebook's 2011 ad revenue of $3.1 billion, according to the company's regulatory filings.
Morningstar analyst Rick Summer stated that Facebook cannot expect to have the same post-IPO growth as Google Inc. (Nasdaq: GOOG), due to the fact that Facebook already has a dominant market share of its industry and a very high number of Internet users.
Summer suggested that increased ad pricing could drive future growth.
"Facebook is already a dominant Web platform and they've got significant Internet penetration today," said Summer. "Ad pricing is clearly going to be where their growth is going to come from."
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NYSE: FB vs. Nasdaq: FB, And the Other Big Facebook IPO Questions
Investors were on high alert today (Wednesday) for a Facebook IPO, which has rumored to reserve both NYSE: FB and Nasdaq: FB as possible ticker symbols.
A New York Post article reported the two listing companies were in "hot debate" for Facebook.
"Facebook won't significantly change the listing revenues for these companies but there could be a real halo effect wherein other companies decided to list with whichever wins Facebook," Larry Tabb, founder of capital markets advisory firm Tabb Group, told The Post.
Besides the ticker, the biggest questions on investors' minds include:
How much does Facebook want to raise? The latest rumors say the filing will set a preliminary goal of $5 billion, which can be raised if enough investor interest is shown.
A New York Post article reported the two listing companies were in "hot debate" for Facebook.
"Facebook won't significantly change the listing revenues for these companies but there could be a real halo effect wherein other companies decided to list with whichever wins Facebook," Larry Tabb, founder of capital markets advisory firm Tabb Group, told The Post.
Besides the ticker, the biggest questions on investors' minds include:
How much does Facebook want to raise? The latest rumors say the filing will set a preliminary goal of $5 billion, which can be raised if enough investor interest is shown.
To continue reading, please click here...