Facebook loses gains sparked by Zuckerberg
Shares down 15% since CEO touted mobile-ad gains at conference 10/10 11:32 AM
SAN FRANCISCO (MarketWatch) -- Facebook Inc. (FB:$19.7383,$-0.4887,-2.42%) slumped Wednesday, adding to a recent string of losses that has seen the social network's shares give up nearly all of the gains that were sparked by comments from CEO Mark Zuckerberg a month ago.
By midmorning trades, Facebook (FB:$19.7383,$-0.4887,-2.42%) shares were off by 2.3% to $19.76 -- having lost more than 3.5% earlier in the session.
A few factors weighed on the stock Wednesday. A pair of brokerage notes expressed continued caution over the company's mobile ad business. Credit Suisse cut its price target on the stock to $24 from $34, keeping its rating at neutral.
"We remain on the sidelines given the lockup expiration, mobile challenges, and the nascent stage of ROI [return on investment] measurement on the platform," wrote analyst Stephen Ju of Credit Suisse.
Also, an article by Bloomberg reported that regulators with the Securities and Exchange Commission had pressed the company for greater disclosure on the risks related to its mobile and desktop ad businesses just days before its controversial IPO on May 18.
The social network has been on a roller coaster for the past month. Zuckerberg lit up the stock with his comments at the TechCrunch Disrupt conference in San Francisco on Sept. 11, sparking an upswing that added more than 24% to the shares over the following week.
In what amounted to his first public appearance since the company's controversial IPO, Zuckerberg made several positive comments about the company's mobile ad business, which analysts believe is key to the company's growth, given slowing usage of Facebook (FB:$19.7383,$-0.4887,-2.42%) through desktop computers.
Facebook's (FB:$19.7383,$-0.4887,-2.42%) shares have largely remained above the $20 mark since then, but a downtick began last week after Zuckerberg touted that the company passed the milestone of having 1 billion monthly active users. See: Facebook (FB:$19.7383,$-0.4887,-2.42%) hits 1 billion users
The stock has come down more than 9% since Zuckerberg's disclosure last week -- and 15% since its closing price on Sept. 19 following the run-up that was sparked by Zuckerberg's comments at TechCrunch.
Facebook's (FB:$19.7383,$-0.4887,-2.42%) mobile ad business remains a key concern for investors. In a note to clients on Wednesday, Jason Helfstein of Oppenheimer noted a slowdown in Facebook's (FB:$19.7383,$-0.4887,-2.42%) desktop usage in September, as measured by comScore. The social network saw a 20% decline in desktop usage in September compared with the same month last year -- an acceleration from the 14% drop shown in August.
Helfstein concluded that the metrics indicate that Wall Street's estimates "remain too high for 2013," though he continues to rate the stock as an outperform.
Ju of Credit Suisse says he also has a "positive long-term bias" on Facebook (FB:$19.7383,$-0.4887,-2.42%) , based on its "user scale." He believes the "network effect" of this scale will give the company a competitive advantage. Facebook (FB:$19.7383,$-0.4887,-2.42%) will report its next quarterly results on Oct. 23.
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