Facebook Inc. fell to a record low after Morgan Stanley, a lead underwriter of the company's initial public offering, cut its price forecast on concern that the social network is struggling to reach mobile users with ads.
Facebook fell 1.4 percent to $17.80 at 1:26 p.m. in New York. Earlier, it touched $17.55, the lowest level since the Mountain View, California went public at $38 a share on May 17.
As more users access Facebook's site over smartphones and tablets, they're exposed to fewer ads, Scott Devitt, an analyst at Morgan Stanley in New York, said in a note to clients today. Facebook's desktop site shows about 30 times more ads per user each day than its mobile counterpart, he said.
Devitt now expects Facebook shares to reach $32 in the next 12 months, down from his previous projection of $38. Facebook, which has lost more than half its value since May 17, has been suffering as analysts and researchers temper expectations for revenue growth. Douglas Anmuth, an analyst at JPMorgan Chase & Co., said in a separate note today that the company may not be able to make as much money from games as he previously thought.
"The dynamics around social gaming have changed, leading to lower monetization for Facebook," Anmuth said in the note. "Web games now operate in a more competitive space, and users are rapidly shifting to mobile devices where Apple and Google control app distribution and payments."
Still, Facebook's advertising revenue should increase more quickly in the second half of 2012 and into next year as it boosts the use of sponsored story ads, said Anmuth, who rates the stock overweight.
Last week, advertising researcher EMarketer Inc. lowered its revenue estimate for Facebook. The company expects Facebook to post $5.04 billion in sales this year, less than its projection in February of $6.1 billion.
Growth in advertising, which makes up the majority of Facebook's sales, will slow to 34 percent in 2012 and 29 percent in 2013, from more than 68 percent last year, New York-based EMarketer said.
In July, Facebook reported sales growth of 32 percent in the second quarter, down from 45 percent in the first quarter and 55 percent in the fourth quarter.