When Facebook first went public, average analyst estimates were roughly $40 a share, now they stand at $28.76, according to
data. While Facebook's earnings and user growth have decelerated, newfound bearishness also revolves around a rethinking on the company's intangible value, as Credit Suisse's price cut shows.
From the company's IPO bonanza to summer trading lows below $18 a share, analysts like Laura Martin of Needham & Co. have had to backtrack on imprecise initial valuations that relied on the Mark Zuckerberg run company being an "option on the world." The analyst cut an initial Facebook valuation from $40 to $25 a share, as real numbers took precedent over rhetoric.
Others like Gene Munster of Piper Jaffray are sticking with valuations in excess of $40 a share, combing through metrics like click rates and teen engagement for reasons to remain optimistic.
Instead of testing the incoming class of Wall Street analysts on their ability to solve brainteasers under the pressure of a final round interview, banks may simply want reach out to college grads for a fresh take on Facebook's value.
Arguably, it is Henry Blodget, the
Wall Street internet analyst and
head, who was most accurate in predicting Facebook's worth and his efforts amounted to a simple
back of the envelope
analysis that any incoming Wall Street analyst should be able to sketch in an interview.
Secondly, new analysts to Wall Street should be well versed in the challenges of valuing fast-growing and disruptive tech companies. Whether it be equity underwriting, sales and trading, brokerage or investment research, business coming out of newly public Silicon Valley startups are a rare growth opportunity for Wall Street investment banks, which continue to suffer from a sharp drop in merger and trading activity.
In the third quarter, global IPO volume of just $21.3 billion was to the lowest level of stock underwriting since the financial crisis, according to
data. Still the numbers show high growth technology and internet startups are driving whatever IPO activity remains and are up sharply compared with 2011 levels, in spite of a general malaise.
As the next set of college seniors and juniors brace for interviews to land the internship or analyst gig that will pave a path to Wall Street glory, their time may be best spent trying to run the numbers on Facebook.
For more on Facebook shares, see the calculations of Credit Suisse's
and why there's
reason to question
whether the company was misleading in its IPO disclosure of risks to a mobile strategy.
Interested in more on Facebook? See TheStreet Ratings' report card for
-- Written by Antoine Gara in New York