By Rodrigo Campos
(Reuters) - In its three days of trading, Facebook's stock has dropped 18 percent from its $38 issue price. For the thousands of investors that bought at the IPO, that's bad enough, but one analysis of its earnings prospects suggests it could get a lot worse - more like $10 a share.
Setting aside the hype and the cultural phenomenon that is the online networking site,
Facebook Inc would be fairly priced at $9.59, according to the smattering of Wall Street estimates analyzed and modeled by Thomson Reuters StarMine.
Data from six brokerages modeled by StarMine forecast the company's estimated annualized earnings growth over the next 10 years at 10.8 percent. That's almost exactly the mean for the technology sector and far below the 24 percent growth rate implied by the current stock price.
Some analysts, however, see the stock returning to the $40 per share level it traded at last week.
"Investors are looking for much more growth than the analysts covering the company," said Greg Harrison, corporate earnings research analyst at Thomson Reuters.
Starmine's intrinsic value estimate incorporates analyst estimates for the next five years of growth and then models another five years of steadily slower growth trends based on industry averages.
It is possible that its data will change as more analyst estimates become available. Underwriters are restricted from issuing research on a company for 40 days, and Facebook has a number of underwriters, led by Morgan Stanley.
Investor confidence in the shares has been damaged after Reuters reported lead underwriter Morgan Stanley cut its revenue forecasts for Facebook in the days before the offering, in part because of comments from Facebook on mobile usage.
After pricing at $38, far more than the first estimate of $28 the company gave investors, shares have been sliding - at one point as much as 31 percent from the $45 peak hit shortly after it started trading Friday.
"Facebook right now is going for far more than what it's worth, it's like buying $1 for $1.98, it just doesn't make sense at this price," said Eddy Elfenbein, widely followed blogger and editor at Crossing Wall Street.
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