The market continues to punish holders of Facebook stock in light of its less than world beating earnings announcment. The future continues to look dim from this trader’s point of view, and that’s unusual for me. I tend to be more optimistic about companies who miss earnings for one reason or another – but Facebook’s warts have clearly begun to show and it remains to be seen as to just how deep the rabbit hole goes.
What Is an Appropriate Target Price fo Facebook Stock
When we initially saw trading open on Facebook, valuation / pricing of the IPO had jumped from around $34/share to $38. That last jump represented the investment banks’ efforts to squeeze every last potential dollar out of the uber-hyped new social media darling. The stock popped up to the low forties on opening day and hasn’t seen its IPO price since. Perhaps the initially suggested offer price of $25 might have been more appropriate – but now secondary market participants can buy as many shares as they like for under $21. Will Facebook stock drop below $20 today?
Haven’t Seen the Bottom of the Rabbit Hole Yet on Facebook
While it may seem shocking to see how far the social media darling has fallen in so short a time – odds are good we haven’t seen the bottom of the rabbit hole yet. There are millions of insider shares held by executives and others which are restricted from open market sale. Only when these start coming on the market will we know how deep the pool of float shares to trade is. The thinking here is that them waters be mighty deep, and come year end we may end up seeing a share price with fewer digits left of the decimal than letters in its stock symbol. Not a pretty picture.