Monitors show Facebook stock during trading at the NASDAQ.ERIC THAYER/Reuters
Facebook's popularity is taking a big hit today just as investors are befriending the other Internet giant that's a household name, with Google shares hitting record highs.
At one point, Facebook shares were down about 10 per cent -- enough to trigger a Nasdaq circuit breaker that's intended to shield stocks from manipulation by short sellers, according to Marketwatch. They closed the session at $20.79 (U.S.), down $2.07, or 9 per cent - the harshest decline in almost two months and the lowest level since Sept. 13.
Today, the blame for Facebook's fallout within the investment community appears directly tied to a weekend report in the influential publication Barron's, where a new analysis concluded the stock was way overpriced to begin with.
Facebook shares have tumbled from their May IPO price of $38, and, at their current value, are still trading "at high multiples of both sales and earnings," Barron's said.
It suggested that the stock, now trading at 47 times Facebook's projected profit of 48 cents a share this year, is worth "perhaps" just $15.
"That would be roughly 24 times projected 2013 profit and six times estimated 2013 revenue of $6-billion, still no bargain price," Barron's said.
"Wall Street's consensus estimate for 2013 shows earnings rising 31 per cent, to 63 cents a share," wrote Andrew Barry.
"That pro forma number is generous because it ignores Facebook's very significant stock-based compensation. The company has been issuing gobs of restricted stock to engineers and other key employees in the hot Silicon Valley job market to prevent them from being lured away to the next hot tech startup - the next Facebook."
For their part, Google shares closed up $15.39, or 2 per cent, at $749.38 after hitting an intraday high of $750.04. There doesn't appear to be any fresh news to account for the latest move, but Wall Street appears again to be favouring the web giant, given the lack of success being seen among younger social media companies.
Display ad trends also look to be in good shape next to Facebook. Last week, eMarketer, a digital advertising research firm, projected Google is set to become the biggest earner in U.S. display ads this year, taking the No. 1 rank away from Facebook Inc.
Facebook also looks downright expensive next to Google, trading at about 47 times expected 2012 earnings compared to only 17 times for Google.
Darcy Keith