Facebook shares sink as investors question growth

Facebook

'Sentiment on Facebook is dreadful right now', analysts claim as shares dip down

LAST UPDATED AT 12:25 ON Fri 7 Jun 2013

FACEBOOK shares have fallen nearly 21 per cent over the past month, as investors worry about a succession of negative headlines and growing doubts over the social network’s long-term business prospects.

“Sentiment on Facebook is dreadful right now,” Brian Wieser, an analyst with Pivotal Research told the Financial Times. “Many investors are disappointed by the fact that they are not seeing doubling growth – and other frankly unrealistic expectations.”

He went on: “The market is not comfortable or confident in [Facebook’s] durability.”

The stock rose to $28.97 on May 2, after Facebook released its first-quarter earnings results showing potential from new advertising products. But it fell again over the next two days – a decline that continued after Facebook Home, the company’s new Android ap, was panned by reviewers. The European release of the HTC First, an Android phone with Facebook Home pre-installed, was indefinitely postponed.

Later in May, Facebook was targeted and put under "immense public pressure" from women’s groups to review its policy towards removing misogynistic content. The FBrape campaign was organised by about 40 women's groups and individuals. It focused on companies whose ads appeared next to offensive content promoting violence against women. More than 50,000 people tweeted in support of the campaign and around 5,000 emailed brands whose advertising appeared next to the material.

The company’s stock fell again this week when Zynga, a mobile gaming company and former partner of Facebook, announced it was making more than 500 redundancies. Yesterday Facebook’s shares closed at $22.97 – around 40 per cent lower than the price in May 2012 of $38.

Last month’s plunge in Facebook stock’s value comes after data released in April showed the site had lost 6m US visitors. · 

For further concise, balanced comment and analysis on the week's news, try The Week magazine. Subscribe today and get 6 issues completely free.