Facebook, Inc. fell below $19, which is half its IPO price. It later recovered to $20.01. There are some issues at Facebook with many lawsuits from dissatisfied shareholders. Some reports say investors who were locked out from buying during the public offering can now purchase shares significantly below $38 a share. The expiration of the lockout last Thursday boosted investors and insiders to sell.
There's certainly a compelling reason to think about Facebook at or around $20 a share. Investors who have long been blocked out of initial public offerings, as shares are doled out to wealthy clients of investment banks, have a shot at sweet revenge. Given how poorly Facebook has done since its IPO, investors could buy shares now at well below the $38 a share offering price, according to USA Today.
Is now the time to buy? Yes and no, depending on who you want to believe.
The bears—the people who say “no”—are cautious because they believe Facebook is going to fall further. Francis Gaskins, an IPO analyst at IPOdesktop.com believes investors should wait because it’s going to fall to as low as $15. He cites the company's valuation and slowing growth as reasons why the stock, even in the $20s, isn't a good buy. Facebook trades for 73 times its diluted earnings per share before extraordinary items, S&P Capital IQ says. “That's well above the valuation of Google, which trades at a price-to-earnings ratio of 19 on the same basis.”
The bulls—the people who say “yes”— 14 Wall Street analysts rate Facebook as a strong buy or buy according to Nasdaq.com. At the same time 12 rate the stock a hold with only one saying to sell.
Bullish analysts say that investors are too focused on the short-term challenges facing Facebook. Victor Anthony, analyst at Topeka Capital Markets, rates Facebook stock a buy and has a price target of $36 for the stock at the end of 2012.
Facebook’s potential for growth
If you are willing to hold on to your Facebook stock for a few years, here are some growth potentials to consider. (My grandson’s stock has at least 16 years to grow before he needs it for college.)
The numbers from Business Community.com certainly support this: