Facebook's stock hit a new low as reality sinks in for the social-networking titan.
Shares opened down 6.6 percent to $31.78 today. It then slipped further to $31.59.
After going public in one of the largest initial public offerings ever, Facebook's stock has seen nothing but trouble. After facing glitches in its first day of trading that halted any potential momentum it had going, shares fell 11 percent on its second day of trading yesterday.
The sentiment this morning wasn't good; shares had already indicated lower before the market opened.
Despite Facebook's massive reach, investors are quickly coming to the reality that the social network's valuation may be out of whack. Despite a massive user base of nearly 1 billion people, many consider its $100 billion value to be too high.
The dilemma: Facebook hasn't quite figured out its business model and how to fully take advantage of the large audience it has captured. More worrisome to investors is Facebook CEO Mark Zuckerberg's insistence that profits take a back seat to the user experience, an admirable goal for consumers, but a scary prospect for shareholders.While the company generates a healthy amount of revenue and profit, it's a small amount relative to its massive user base. Many analysts expect revenue and profit to slow this year, with acceleration picking back up next year.
On a price-to-earnings multiple, or the ratio of its stock price with its expected full-year earnings used as a key metric for valuation, is far higher than more established companies such as Apple and Google, both of which have proven models of making money.
Still, some analysts remain bullish. Wedbush Morgan analyst Michael Pachter said yesterday he expects the social network's stock to rise to $44 in the next 12 months. Sterne Agee analyst Arvind Bhatia said earlier this month that he expects the company's shares to jump to $46 over the next year.
The uncertain growth prospects for the company have led to a wide range of price targets for the stock. But for now, the stock's direction only appears to be heading one direction: down.