Facebook share price plunged 12% this month. On Tuesday company hit their lowest point of the year closing at $24.10 per share. Right now Facebook stock is down 10% year-to-date comparing to Nasdaq climb of 4% this month and 16% total year raise. Company struggles not only comparing to main US indexes but also to its competitors Google and Linkedln which grew respectfully by 25 and 50% this year.
Facebooks shares top drawback is their valuation compared to price-to-earning ratio of more than 40 times 2013 profit estimates. That makes it more expensive than Google, Yahoo and AOL. Companys earnings per share are supposed to rise only by 7.5% this year even though some forecasts say a raise of 30% could happen.
The social network site may never be able to reach Googles advertising level as people keep resisting on clicking ads on the site. The purpose of the two is totally different which is reflected in their marketing outcome.
Bottom line, Facebook is a nice story but could it be able to battle with companies like Google where advertising is bringing immense profits. All we know is that Wall Street strategy for summer trading “Sell in May and go away” is working considering Facebooks recent price drops.
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