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Facebook stock hit a fresh low yesterday (Tuesday), with shares reaching $17.55 before closing at $17.73.
The slump came after a trio of brokerage firms slashed their price targets for Facebook shares. The firms cited the wave of expiring lockup periods that will flood the market with close to 1.7 billion shares over the next several months.
The first lockup period expired Aug. 16, freeing a first batch of some 268 million shares. In mid-October, 192 million more shares will be let loose, and on Nov. 14 a whopping 1.2 billion shares will be free to sell.
The total is more than four times the number of shares floating on exchanges before the lockup periods began expiring.
“It’s like a train coming around the corner toward shareholders, so they better get out of the way,” Francis Gaskin, president of research firm IPOdesktop told the Los Angeles Times right before the end of the first lockup.
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New and Reduced Facebook Stock Targets
Due to the extra shares as well as concerns over Facebook’s declining ad revenue, analysts have been slashing FB price targets. Here are the latest lowered estimates:
“Facebook has multiple lock-up expirations over the next year, and recent selling activity on the August lock-up suggests to us the risk of future selling pressure,” wrote BofA analyst Justin Post. Looking ahead to November’s lockup expiration, Post added, “We wouldn’t expect the stock to see buying momentum until December.”
BofA maintains a “Neutral” rating (what some traders love to call a seven-letter word for “sell”) on Facebook.
“Although valuation appears tempting, the uncertainty of the earnings trajectory and increasing public float leaves us cautious,” Jordan Rohan of Stifel penned in a note to clients. While Rohan acknowledges Facebook’s platform “has huge potential” it still must overcome “significant” challenges with monetization.
Stifel doesn’t have a price target on the stock and currently rates shares a “Hold.”
Facebook stock gained nearly 5% by 11 a.m. to hit $18.55.
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Tags: Facebook Quote Price, facebook shares, facebook stock, Facebook stock price, Facebook stock targets, FB shares, Nasdaq: FB
2012-09-05 08:50:16
Source: http://moneymorning.com/2012/09/05/what-drove-facebook-nasdaq-fb-shares-to-a-new-low/
What drove it so low is that it nothing more than a data mining operation! Nothing from nothing is nothing. Facecrook will be but a memory by 2020!