Shares of Facebook Inc. (NASDAQ:FB) dropped to a record low today after a couple of analysts lowered their price targets on the stock, noting the large number share lockups set to expire as well as signs that advertising revenues will probably not live up to expectations.
Bank of America Merrill Lynch and BMO Capital Markets both lowered their price targets on Facebook. Stifel Nicolaus trimmed its estimate for the company’s 2013 fiscal year but does not have a price target on the stock.
The most important matter over the short term is that billions of shares “locked up” as part of Facebook’s IPO are beginning to become freely tradable in a series of waves over the next few months. In mid August, about 271 million shares were released, and more than 1.5 billion shares will become freely tradable by mid November. Even more shares are set to be released from trading restrictions later. Investors are concerned that this will push down the stock’s price if insiders like early investors and employees hurry to sell their shares.
Daniel Salmon of BMO reduced his price target to $15 from $25.He said the lockup expirations were one issue, and also cited concerns about the company’s advertising business.
According to the Stifel’s Jordan Rohan, Facebook’s platform has enormous potential, but still faces important challenges with monetization.
As of mid-day Friday, Facebook (NASDAQ:FB) had dropped 4.26% to $18.31 with a trading volume of 35.46 million shares.