Wall Street initiates coverage of Facebook with low expectations

FACEBOOK was greeted half-heartedly yesterday when Wall Street analysts initiated coverage of the overhyped stock 40 days after its Nasdaq debut.

Morgan Stanley, the lead investment bank on Facebook’s flotation, rated the social network’s stock as “overweight”, even though the shares are currently trading at 13 per cent below their IPO price.

The bank, whose investment arm guided Facebook to its $38 per share float price, gave the stock a 12-month price target of $38, implying little hope that the shares have much to gain.

“Our base case scenario assumes that Facebook’s revenue growth moderates as it takes a measured approach to increasing mobile ad load while engagement increasingly shifts to mobile devices,” Morgan Stanley wrote in a note.

JP Morgan, the second bank on the deal, also initiated coverage with an “overweight rating”, although it held more hope for growth than Morgan Stanley, giving Facebook a price target of $45.

Goldman Sachs, however, recommended that investors buy Facebook shares, as did a handful of other analysts including Nomura, Topeka Capital and Needham & Co.

The naysayers included BMO Capital and Sanford Bernstein, which both rated the stock as “underperform” and gave it a price target of $25.

Facebook’s shares, which had climbed over the past few days, sank 2.63 per cent to $32.23 yesterday.