May 5 Shares of Facebook Inc, which were given a boost last week when the social networking company reported first quarter results that largely met analysts' expectations, may be over valued, financial newspaper Barron's said on Sunday.
Facebook closed at $28.31 on Friday, 60 percent higher than last summer's low-point, but well below its initial public offering price of $38 last May. However, the company is probably worth no more than $25 a share, Barron's said, reiterating a stance it took in February.
Facebook trades for 75 times its 2013 earnings estimate using generally accepted accounting principles (GAAP), while Google trades for less than 20 times its 2013 earnings, the article said.
While a sharp rise in mobile ad revenue helped Facebook increase its overall revenues by 38 percent in the quarter versus a year earlier, that mobile ad revenue came at the expense of desktop ad revenue, which was flat, Barron's said.
The paper warned that desktop ad revenue may start to drop, meaning investors are assigning a "hefty" market value to Facebook of $71 billion, based largely on just $1.5 billion in mobile ad revenues. Expenses were up 60 percent in the quarter, it added.
Google has been investing in a range of products, from YouTube, self-driving cars, interactive eye wear, maps and Android software. "Facebook seems more focused on barraging subscribers with ads to meet Street profit expectations," Barron's said.