NEW YORK - Facebook Inc.'s stock took a hit Monday after an article in the financial magazine Barron's said it is "still too pricey" despite a sharp decline since its initial public offering.
Though Facebook's stock has plunged since its May IPO, Andrew Bary at Barron's said the stock trades at "high multiples of both sales and earnings, even as uncertainty about the outlook for its business grows."
At issue is the shift of Facebook's massive user base to mobile devices. The company is still figuring out how to advertise to people who use their mobile phones and tablet computers to access the social network. Bary said success in the mobile space is "no sure thing" for the company. Mobile ads must fit into much smaller screens, which doesn't give Facebook "much room to configure ads without alienating users," Bary said.
Facebook also has what Bary called "significant" stock-based compensation expenses. Last year, the company issued $1.4 billion worth of restricted stock and $1 billion so far this year, he noted. Yet technology companies such as Facebook "routinely encourage analysts to ignore stock-based compensation expense-and most comply. This dubious approach to calculating profits is based on the idea that only cash expenses matter," Bary wrote. "That's a fiction, pure and simple."
Menlo Park, Calif.-based Facebook's stock fell $2.20, or 9.6 percent, to $20.66 in afternoon trading. The company went public on May 18 at a share price of $38, which it has not hit since.
Bary said he thinks Facebook's stock is worth $15, well below its current price even with Monday's drop.
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