Every day I get one day closer
to deleting my Facebook account.
- Robert Goddard, a.k.a. Robo
Views From the Cheap Seats
This past Wednesday marked the fortieth day since Faceplant's, I mean Facebook's, May 18th initial public offering, and thus brokerage firms involved in the company's IPO could officially publish research. Presented below are several tidbits from Wednesday's research reports. Mind you, these are some of the brightest and highest paid minds on Wall Street.
Morgan Stanley: The underwriter who took the lead in the IPO initiated coverage with an Overweight rating and a $38 price target. Wait a minute…refresh my memory…wasn't $38 the price where Morgan Stanley priced the IPO? Are you saying you priced the stock with not ONE SINGLE PENNY OF UPSIDE for investors who bought the stock on the deal? Let me ask you a question: If Facebook was trading on Wednesday at $43 instead of $33, would you have placed in "Underweight" rating on the stock? I didn't think so.
J.P. Morgan: Initiates with an Overweight and a $45 price target. But your target price is for year-end 2013. Based on Tuesday night's $33 closing price on Facebook, that represents 36% upside in 18 months. Not bad, but that's a lot of risk to take for a stock with a P/E ratio greater than Apple or Google. Combined. Then again, based on what I've been reading about J.P. Morgan in the papers, you folks like to take a lot of risk for very little reward.
Bank of America/Merrill Lynch: Starts coverage with a Neutral rating and a $38 price target. But wait, Morgan Stanley also has a $38 price target, yet they rate the stock an Overweight. To put this in perspective, my friends from Morgan Stanley say I'm overweight, while my friends from BofA/Merrill Lynch say I'm just under tall.
Morgan Stanley, Part Deux: Analyst Scott Devitt says he can make a "bull case" in which Facebook is worth $52, and a "bear case" in which it's worth $22. Memo to Mr. Devitt: I can make a "bear case" on your career if Facebook goes to $22 while you have an Overweight rating on the stock.
Credit Suisse: Starts with a Neutral rating and a $34 price target. Bold. Very bold.
BMO Capital: The firm slapped an Underperform rating and $25 price target on the company. Fans of Facebook call BMO the "Facebook Nazi."
Goldman Sachs: Initiates the stock with a Buy rating and a $42 price target. "Facebook is ushering in the next era of the web," proclaims your analyst. Really? Then why, with a forecasted return of 27% in the next twelve months, did you not add Facebook to your "Conviction Buy List," where the expected return on nearly half of the 62 stocks on that list have appreciation rates less than Facebook? Take your time. i've got nowhere to
Pacific Crest: Initiates coverage with a Sector Perform rating without assigning a target price. Wimps.
Geiger and Goddard's opinion on owning Facebook stock: We'd tell you, but chances are you would "defriend" us.
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