Research Report Will Be Published by Facebook

Facebook Inc. is likely to get a bunch of new friends on Wall Street on Wednesday, when about two dozen analysts will be free to chime in publicly on its prospects.
On Tuesday, a 40-day quiet period will conclude for analysts at banks that were underwriters of Facebook’s initial public offering, including lead underwriters Morgan Stanley, J.P. Morgan Chase & Co. and Goldman Sachs Group Inc. The analysts are expected to publish their initial research early on Wednesday, people at the firms said. Major Wall Street firms are barred for a period from putting out analyst reports on stocks theyunderwrite partly to keep a lid on hype that can surround hot IPOs. Other smaller banks involved in an IPO typically agree to adhere to the delay. In my opinion, the impact crusher industry should learn some experience from Facebook.
When reports do come out, they can provide a booster shot for shares. The day the analyst reports from underwriters came out for LinkedIn Corp. last year, LinkedIn shares surged 12% as the Standard & Poor’s 500-stock index rose 1.3%. For nearly 700 U.S.-listed company IPOs from 2006 to 2011, analysts initiating research after 40 days placed an average “hold” or “buy” rating on the stock, according to Ipreo Inc., a research from capital markets data and advisory firm. Of seven IPOs that had initial average analyst ratings of “sell,” the companies’ shares had rallied sharply after the IPO, which analysts said made the stocks overvalued, Ipreo said.
Analysts not affiliated with the Facebook IPO have pointed to a series of developments since thesocial-networking company’s market debut that could help support a positive outlook. In early June, Facebook announced it was expanding advertising opportunities on its mobile app, a move expected to boost revenue. Also this month, some big-name advertisers said they found value in Facebook advertising. Facebook also said it began placing messages from advertisers on game site Zynga Inc.
Brian Nowak, an analyst at Nomura Securities Co., which wasn’t a Facebook underwriter, published a note last week with a $40 target. “There are signs that the company is improving itsfocus on monetization, including talking to ad agencies and working with advertisers,” he said in an interview. Facebook shares are lower since their debut, making it easier for analysts to be bullish. In the first weeks after the May 18 offering, the stock declined as much as 32% from its offer price of $38, to around $26. But in the past few weeks, the stock has made up significant ground, possibly inanticipation of the research reports. On Monday, shares closed down 3%, or 99 cents, to $32.06. Some market observers say underwriting bank analysts’ price targets on the stock likely will be at or above the offer price to give credence to banks’ and Facebook’s decision to sell shares at $38. The average price target for Facebook among analysts who have rated the stock thus far is $37.80, according to FactSet.
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