Facebook Status Update: 'Like', but Not Love
NEW YORK (TheStreet) -- After spending 40 days in silence, some analysts erupted with concerns about Facebook's(FB) ability to generate revenue from mobile and online advertisements.
Wednesday marked the end of the "quiet period" for the 33 so-called bulge-bracket banks involved in underwriting Facebook's initial public offering.
BMO Capital Markets, which sold about 421,000 shares in the offering, was the most bearish among the banks initiating coverage. BMO rated shares "underperform," the equivalent to sell, with a price target of $25.
Credit Suisse, responsible for selling 9.47 million of Facebook shares, also was relatively bearish about the Menlo Park, Calif.-based social network, initiating coverage with a neutral rating and a $34 price target.
Credit Suisse analyst Spencer Wang doubts Facebook's ability to monetize mobile usage and, like BMO Capital Markets analyst Daniel Salmon, questions the effectiveness of social advertising. "We anticipate that the rate of growth in mobile usage for Facebook will exceed the growth in usage through desktop for the foreseeable future," Wang wrote. "However, Facebook does not currently generate any meaningful revenue from usage on its mobile products, and its ability to do so successfully is unproven."
Wang believes that Facebook is well positioned in the space to continue capturing growth in social media, as well the ability to monetize its opportunities outside of advertising, but is cautious about valuation at these levels, suggesting limited upside. Facebook's current valuation is 23 times 2013 enterprise value over EBITDA.