Tuesday, July 17, 2012

Facebook: Two Months Since IPO

See previous related post: Facebook Ready for IPO

To truly visualize the disappointment of Facebook (NASDAQ: FB) two months after its initial public offering, compare it with nothing else but LinkedIn (NYSE: LNKD) during the same period. From the IPO price of $38 launched on May 18th, Facebook has closed as low as 25.87. It made modest gains in June, climbing back as high as $33.10 on June 26th, before falling back down to close Tuesday at $28.09. This comes over the news that users in both the United States and Europe had fallen over the past six months. The research by Capstone, reported that US users declined by 1.1%, while 14 of 23 countries in which Facebook had over 50% penetration experienced "fewer users or saw little change." This report comes days after Warren Buffett, who's known to hold onto stocks for the long-term value, stated that "investors frustrated with the stock’s decline since its public offering are paying the price for betting on a short-term rally." Given the closing price of $28.09, that is a 26.08% drop during the period.

LinkedIn, the professional network, in the meantime saw its shares fall from the May 17th closing price of $104.95 to the present $103.84. That is only an 1.06% drop. What may be surprising is that the financial statements of Facebook look much more healthy. While people may claim is overvalued at its P/E ratio approaching 90, LinkedIn still has its ratio soaring above 600. Facebook's Q1 profit margin also trumped that of LinkedIn, 19.38% to 2.65%. But it's the growth that's raising the concern. Facebook's profit margin is actually down from 2011, when it was 26.95%, while LinkedIn has seen it soar from 2.28%. It's not just Wall Street that is punishing Facebook. In the latest American Customer Satisfaction Index E-Business Report, Facebook sank to a record low, falling behind Google+ and LinkedIn. Among the complaints of Facebook included "an excess of ads and privacy concerns."

Tumbling with Facebook over the past two months is Zynga (NASDAQ: ZNGA). From the $8.27 closing price of May 17th, it is currently at $4.58, representing a whopping 44.62% decline. Zynga is heavily reliant on Facebook to launch its social game services, and the Q1 profit margin was a dismal -26.59%.

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