MORNING COFFEE

Facebook Begins Trading Today. Yesterday Facebook (FB) priced its shares which begin trading today at $38.00 per share. 

The hype surrounding the company’s IPO allowed the company to raise its initial price range of $28.00-$35.00 to $34.00-$38.00.  Then to meet demand Facebook increased the offering size of the IPO 25% to offer 421 million shares to the public.

The IPO allowed Facebook to raise about $16 billion and values the company at about $104 billion.  That makes the IPO the third largest ever for a U.S. company behind Visa (V) and GM (GM).

Some on Wall Street are questioning the company’s valuation.  Reports say that Peter Thiel, Goldman Sachs (GS) and Tiger Global all plan to sell up to 50% of their shares.  With a market capitalization of $104 billion, Facebook’s price-to-earnings ratio would be more than five times that of Apple (AAPL). Additionally, recent news came out that GM will be pulling its advertizing on the social networking site due to poor results. Putting into question whether the company will lose more large advertisers.

Resent history also has shown that investors that purchase shares in the open market the day the IPO begins trading do not do so well.  Here are some examples Pandora (P) was priced at $16.00 and the average price paid by the retail investor the day it began trading was $21.00.  Pandora is now trading at $10.52, for a loss of nearly -50%.

Groupon (GRPN) was priced at $20.00 at the IPO, retail investors paid on average $28.00 and the shares are now trading at $12.41 for a loss of -56%.

Zanga (ZNGA) was priced at $10.00 at the IPO, retail investors paid on average $10.00 and the shares are now trading at $8.27 for a loss of -17%.

Yelp (YELP): was priced at $15.00 at the IPO, retail investors paid on average $24.00 and the shares are now trading at $21.27 for a loss of -11%.

Will the same losses happen to investors that decide to purchase shares today?  Only time will tell.  But, this value portfolio manager will pass on purchasing shares today.

Upgrades

Prestige Brands (PBH): Oppenheimer raised their rating from Perform to Outperform and placed a target price of $17.00 on the company.

Morgan Stanley (MS): UBS raised their rating from Neutral to Buy and raised their target price from $19.00 to $21.00. Pre-market: 13.76 +0.30 (2.23%)

Coverage Initiated

Mattel (MAT): SunTrust initiated coverage with a Buy rating and target price of $40.00.

Bristol-Myers Squibb (BMY): BMO Capital initiated coverage with an Outperform rating and target price of $39.00.

Eli Lilly (LLY): BMO Capital initiated coverage with a Market Perform rating and target price of $38.00. Pre-market: 40.53 0.00 (0.00%)

Corning (GLW): Susquehanna initiated coverage with a Neutral rating and target price of $14.00. After Hours: 12.81 -0.01 (-0.08%)

Liberty Media (LMCA): Evercore initiated coverage with an Overweight rating. Pre-market: 81.31 +1.64 (2.06%)

Yelp (YELP): Raymond James initiated coverage with a Market Perform rating. Pre-market: 21.50 +0.23 (1.08%)

Angie’s List (ANGI): Raymond James initiated coverage with an Outperform rating and target price of $17.00. After Hours: 13.05 -0.30 (-2.25%)

Earning Reports

Aeropostale (ARO): Reported EPS of $0.13 in-line with estimates. Pre-market: 17.81 +0.10 (0.56%)

Applied Materials (AMAT): Reported EPS of $0.27 beating estimates by +$0.03. Pre-market: 10.40 -0.08 (-0.76%)

Gap (GPS): Reported EPS of $0.47 beating estimates by +$0.01. Pre-market: 26.95 +0.64 (2.43%)

Intuit (INTU): Reported EPS of $2.51 beating estimates by +$).03. After Hours: 54.35 -0.06 (-0.11%)

Foot Locker (FL): Reported EPS of $0.83 beating estimates by +$0.09. Pre-market: 29.36 +1.35 (4.82%)

Markets: 
Futures at 8:02: Dow +0.37%. S&P +0.48%. Nasdaq +0.46%. Crude +0.10% to $92.66. Gold +0.95% to $1590.00. 

Europe: London -0.74%. Paris +0.23%. Frankfurt +0.19%. 

Asia: Japan -2.99%. Hong Kong -1.30%. China -1.44%. India +0.51%.