Two Internet rivals were pulled in opposite directions by traders on Monday, as Google set a new high while Facebook slid nearly 10% — tripping the Nasdaq’s circuit-breaker rule designed to prevent runaway short selling.
A couple factors weighed heavily on the social-network operator. A cover story by Barron’s over the weekend questioned Facebook’s mobile advertising business, as well as its heavy use of stock options to compensate employees. The story said the stock should be worth $15 — about 34% below its value prior to Monday’s opening bell. Barron’s, like MarketWatch, is owned by News Corp.
An analyst with Stifel Nicolaus, meanwhile, maintained his neutral view of the shares, writing that “investors may be assuming incorrectly that Facebook will show upside soon from mobile.”
Facebook shares (US:FB) were most recently trading down nearly 9% at $20.81. Later in the afternoon, reports circulated of a possible bug that was making some users’ private messages public, but the company said the messages were older, public Wall posts.
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Google’s stock (US:GOOG) was last up more than 2% to $749.52, partly due to an upbeat note from Citigroup analyst Mark Mahaney, who raised hits price target for the Internet giant to $850 from $740.
One factor cited by Mahaney was that the danger to Google from more heated competition, including from Facebook, may have abated. Some analysts had warned that Facebook could pose a major threat to Google in the online ad market, especially with the rise of social search. But those fears now appear overblown, Mahaney argued.
“A year ago there was heightened concern that social search — especially the integration of Bing and Facebook — could be disruptive to Google’s core search attractiveness,” he wrote. “To date, there has been no real evidence of social search disruption.”
The Barron’s report on Facebook noted that “success in mobile is no sure thing.” It was not the first report to raise concern about Facebook’s valuation.
Sentiment on Facebook got a boost from the appearance of CEO Mark Zuckerberg at the TechCrunch Disrupt conference in San Francisco on Sept. 11. In his first public speaking engagement since Facebook’s controversial IPO in May, Zuckerberg said investors were not giving Facebook enough credit for its quickly growing mobile ad business, though most revenues still come from desktop ads.
In his report Monday, Stifel analyst Jordan Rohan said investors may have been too quick to assume upside from Facebook’s mobile ad business.
“The measured usage of third party [outside Facebook] user intent data appears to be key to making Facebook ads work,” Rohan wrote. “This is different than the assumption many investors made — that Facebook would figure out monetization because it has unique or superior user data.”
For Google, another point highlighted by Citi analyst Mahaney was the potential of Google Maps, which he called one of the company’s most “undermonetized” assets — even after Apple Inc. (US:AAPL) decided to replace Google Maps with its own mapping application in the newly launched iPhone 5.
“To begin, what seems clear to us is that Google has recently accelerated the pace of innovation around maps,” Mahaney wrote.
Another analyst, Trip Chowdhry of Global Equities Research, issued a note over the weekend reporting that Google is coming back with a new mapping app for the Apple iOS mobile platform, which has been submitted for approval and could be available within two weeks.
A Google spokesman said he could not confirm the report, saying, “Our goal is to make Google Maps available to everyone who wants to use it, regardless of device, browser or operating system.”