Facebook Target Price Issued Below $38 IPO by Banks That Brought the Company Public

Facebook Logo 2011

Facebook Logo 2011

As a 40-day quiet period ends, BMO Capital Markets predicts the stock will sink to $25, while J.P. Morgan predicts it will rise to $45 in the next 18 months or so.

The banks that took Facebook public have issued an average target-price on the stock of $37.71, which is 29 cents below the $38 IPO price.

Wednesday marked the end of a 40-day waiting period for the 18 banks that underwrote the Facebook IPO, and 12 of them issued ratings and price targets. The high target was $45 set by J.P. Morgan, and the low was $25 from BMO Capital Markets.

Two banks matched the IPO price of $38, while five set targets that were higher and four set targets that were lower. One, Wells Fargo, set a target that was both under and over: $37-$40.

On the low end, BMO’s $25 target was accompanied with an “underperform” rating based in part on Facebook’s ability to keep selling ads at a high price.

“With user growth decelerating (we estimate 22 percent in 2013 and 16 percent in 2014), pricing power will be required to support valuation, and we believe this will be a challenge in light of industrywide declines,” the BMO analysts wrote. “We would become more positive with the launch of rich media or online video ads, but these have not yet materialized, likely in the name of not disrupting the user experience.”

And on the high side, J.P. Morgan’s $45 target was accompanied with an “overweight” rating.

“As an underlying social fabric of the web, Facebook is a unique platform asset with strong network effects, a deep competitive moat and unparalleled social context,” the analysts at J.P. Morgan wrote. “We believe the next phase of the Internet will be driven by data and powered by ubiquitous online access, and Facebook is well positioned here through its large and engaged user base, virtual ownership of the social graph and unwavering focus on the user experience.”

The stock was down 2.6 percent on Wednesday to $32.23, making Facebook a $68.9 billion company, about $15 billion more valuable than News Corp., judging by the market capitalizations of both at the close of trading Wednesday.