The social-media company’s stock price was down nearly 8% to about $21 in mid-afternoon trading after a weekend cover story in the financial weekly said Facebook might only be worth $15. Shares went public in May at $38. Many analysts and investors don’t appreciate how much stock the company has awarded its employees for their compensation, Barron’s writer Andrew Bary says. “Facebook issued $1.4 billion of restricted stock in 2011, or nearly $500,000 per employee. So far this year, the company has doled out $1 billion of restricted stock.” All told, the stock-based compensation could amount to 20 cents a share — a big deal for a company that has been selling for about 47 times its expected 2012 profit of 48 cents a share, and 36 times the 2013 consensus forecast of 63 cents a share in earnings. Bary says tech analysts often ignore that expense. “This dubious approach to calculating profits is based on the idea that only cash expenses matter. That’s a fiction, pure and simple. As Warren Buffett has said, companies could take this to the extreme, pay all their expenses in stock and claim to have no costs.”
Separately, Pivotal Research Group’s Brian Wieser lowered his Facebook price target by $1 to $32 a share due to “slower-than-we-previously-expected launches” this month of the Facebook Ad Exchange. The program enables companies that monitor Web users’ search activity to buy Facebook inventory in real time and post targeted ads to these people when they visit the social network site.
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