June 27, 2012
-- Hamilton Equity
TEL AVIV (MarketWatch)
-- Facebook Inc. FB +3.24% shares were initiated neutral at Citigroup, where analysts Mark Mahaney and Neil Doshi set a $35 price target on shares of the Menlo Park, Calif., social-networking firm. The shares provide "[significant]
long-term potential, offset by medium-term risk," the analysts wrote in a Wednesday report. On the plus side, Facebook can take advantage of its "almost unassailable position as the social-networking leader," with 900-million-
plus users and a global Internet-ad market that could be valued at $130 billion by 2015, Mahaney and Doshi wrote. Potential revenue streams include ad networks, subscriptions, digital-media sales and more, the analysts wrote. Investment risks include the dual-class stock structure; "limited appeal to advertisers today," based on a Citi survey; unclear ability to convert a mobile platform into revenue; no current presence in the largest Internet market, China; and potential large additional stock supply when lockups expire and options are exercised, Mahaney and Doshi wrote. Their price target values FB at 40 times their 2014 earnings estimate, a "premium" multiple but one that's supported by the company's growth rate, they said.
By Robert Daniel