Buy Facebook On Lockup Expiration Dips

While investors keep losing faith in Facebook (FB), we believe the stock has a higher potential for upside.
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Sept. 19, 2012 - PRLog -- While investors keep losing faith in Facebook (FB), we believe the stock has a higher potential for upside. As the recent dip in shares has shown, FB was highly overvalued at an IPO price of $38. However, the current price of $21.6 is a more reasonable one, considering that FB is trading at similar multiples to other Internet giants. Moreover, the social media giant has approximately $10 billion in cash, which comes down to almost $5 per share. The major concerns for current shareholders remain lockup expirations and a dip that would follow.

The biggest catalysts for Facebook, for the time being, are the expiration dates of its lockups. Improved Q2 2012 results were not enough to warrant investor confidence in a future for Facebook. The company reported revenues of $1.18 billion and EBIT of $515 million. By the end of August, the stock price had already fallen more than 40% from its pre-earnings announcement value. As the number of tradable shares increased, chances remain of FB slumping further.

We believe that the recent improvement in mobile advertisement has significantly improved long-term prospects for consumers. The stock is currently priced right, but there is the potential of a further decrease due to lockup expiration. Due to our belief in FB's long-term growth, we recommend that any post-lockup expiration dips will be an ideal entry point into the stock. We are bullish on FB's long-term growth prospects, but are recommending a hold position due to the expected dips on lockup expirations.

Source URL: http://seekingalpha.com/article/874771-buy-facebook-on-lo...
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