Shares of social media giant Facebook (NASDAQ FB) declined after the company got a rare downgrade from Janney Capital. Shares of Facebook were close to their all-time high, so a downgrade based on valuation concerns may not be too surprising to some.
Janney Capital cut its rating on Facebook shares from Buy to Neutral. However, it is important to note that the analyst left his $82.50 price target unchanged. That target still represents upside from current levels, so that’s something to think about. The following quote details the analyst’s move:
“We are downgrading FB to Neutral from Buy as we reposition our picks for the forthcoming year, and as we believe FB’s strong performance to date will start to face valuation headwinds in 2015 as top line growth, engagement, and MAU naturally decelerate. We suspect we are already seeing some of this as the stock has started to react less to earnings upside.”
Facebook Inc: FB Downgraded
“The company has tremendous monetization opportunities beyond its massive core mobile ad market as it finds ways to make more through video advertising, new online assets (e.g. Instagram), and new products (e.g. search). Many investors already expect this to happen. Our earnings numbers, which also reflect this optimism, and FV are unchanged at $82.50.”
It’s important to note that the analyst talked about a natural deceleration of growth. Facebook is still a growth company, but it is unreasonable to expect the company to continue growing at the same rate it has been in recent years. You won’t find too many companies with a near $200 billion valuation growing this quickly.
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Facebook Inc (NASDAQ FB) Business News
Facebook, Inc (NASDAQ FB)’s stock recently made a leap from around $70 per share to $76 per share, following its Q2 results. This happened in mid-July and the Facebook FB ticker struggled to maintain its positions afterwards, but has been steadily rising since the beginning of the month.
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