The social networking world has been turned upside down overnight, with Facebook suffering a massive 11% drop in its share price, while old rival MySpace has emerged with a new look – and it’s already receiving positive buzz.
The poor performance in Facebook shares overrides the last two weeks of positive news for Facebook, which began with an interview given by Mark Zuckerberg at a tech conference – which promptly gave a boost to the company’s share price.
The latest decline will only serve to confirm fears the company is not producing good enough financial results.
But, overnight, influential market publication Barron’s wrote Facebook shares are trading at “high multiples of both sales and earnings, even as uncertainty about the outlook for its business grows”.
“Facebook’s 40% plunge from its initial public offering price of $US38 in May has millions of investors asking a single question: Is the stock a buy?” Barron’s said.
The short answer, it said, is “no”, adding that the shares are perhaps only worth $US15.
Shares promptly dropped 11% to as low as $US20.36, after finishing at $US22.86. The drop comes at a bad time, with a bigger supply of employee shares about to come on the market. The result will likely drive prices down even further.
The drop in Facebook’s share price last night is yet another confirmation the market has softened on the company’s prospects.
The outlook improved when Zuckerberg spoke openly about the performance, saying earlier this month “the performance of the stock has obviously been disappointing”.
He then said the company hopes to make more money on mobile than its desktop business – but Barron’s has pointed out the network is still struggling to make that work. Other analysts have pointed out the mobile advertising platform is still in its early days.
Meanwhile, Facebook’s old rival MySpace – snapped up in 2010 from News Corp by a group of investors including pop star and start-up investor Justin Timberlake – has shown off its new look.
Although the site hasn’t been publicising any changes over the past several months, it has now released a new preview video that shows off the site’s new look that focuses on entertainment and content rather than socialisation.
The new site features a media-focused network, with a big emphasis on playing music and sharing photography, in a set-up similar to Pinterest.
Early reception is unusually good. It comes after the company claimed earlier this year that it was recording, on average, 40,000 new registrations per day.