Wall Street analysts give Facebook cautious nod
Wall Street's top financial firms delivered highly-anticipated assessments of social networking phenomenon Facebook Inc on Wednesday, giving a cautious nod of approval about the company a month after its rocky initial public offering.
Analysts said they see significant long-term potential for Facebook - the top social networking website - and expect it to corner a substantial share of the global Internet advertising market. But risks remain, given limited visibility over the business model and uncertainty over mobile monetization.
Barclays Capital, Stifel Nicolaus and Citi Investment Research & Analysis set a "hold" or equivalent rating on the stock, while Morgan Stanley and RBC Capital Markets began coverage of Facebook with their top ratings.
The batch of analyst notes represent Wall Street's most broad-based assessment of the social networking phenomenon, which retained 33 financial firms as underwriters for its high-profile IPO in May.
Banks that participated in Facebook's IPO were generally required by securities regulations to wait until 40 days after the offering before publishing their views, limiting the available research about Facebook to date to a handful of analysts not involved in the offering.
Analyst Scott Devitt of Morgan Stanley, the lead underwriter of Facebook's $16 billion IPO, set an "overweight" rating and price target of $38 on the stock.
Devitt, who told Morgan Stanley's major clients that he cut his revenue estimates on Facebook just days before the IPO, on Wednesday said the company is uniquely positioned to leverage its large and highly-engaged user base to monetize the mobile Internet.
However, analysts at Barclays cited concerns over the company's ability to derive any meaningful revenue from its increasing mobile usage.
Barclays analysts set a price target of $35, while RBC set a $40 target on the company's stock.
Shares of Facebook remain below their $38 offering price, trading as low as $25.52 before regaining ground to trade in the $31 to $33 range in recent days.
One of the most highly-anticipated offerings in history, the Facebook IPO was marred by a series of technical glitches by the Nasdaq exchange that caused order fulfillments to be delayed for many investors.
Facebook's decision to increase the size of the offering by 25 per cent days ahead of the IPO, as well as concerns about Facebook's decelerating revenue, also weighed on the stock, according to some observers.