At first blush, Facebook's earnings look good - the social networking giant beat expectations by $.04 a share, and revenue was up 63% year over year. But there are several trends among Facebook users that are going in the wrong direction, and threaten future growth.
Facebook earnings report
Facebook stock rose nearly 3% Tuesday to come within $11 of its IPO price - but a disappointing earnings report could send shares plunging if the social media giant doesn't show healthy improvement.
One of the biggest things to watch when Facebook Inc. (Nasdaq: FB) reports Q1 earnings after the close Wednesday will be how the company is managing the transition to mobile.
Releasing earnings after market close, the social network leader posted earnings per share of 12 cents, on revenue of $1.26 billion, or 32% higher than the year-ago quarter.
While Facebook did not provide an outlook following its uninspiring second quarter release, analysts were looking for 11 cents per share on revenue of $1.2 billion, according to data from Thomas Reuters.
But this positive vibe doesn't mean Facebook's earnings problems are solved.
Despite a recent milestone (one billion users), a new "want" button feature and a "pay-to-promote post" option, the company has failed to drum up investor and analyst fanfare.
Wall Street shrugged off all of the recent news and Facebook (Nasdaq: FB) stock barely budged, except to move a little lower.
Even CEO Mark Zuckerberg's mid-September interview, which appeared to put some spark back into Facebook's fading shares, now seems like a very distant memory.
But something people haven't questioned as much is if there are any competitors lurking in the shadows that could eat away at Facebook's online presence.
Turns out Facebook has reason to be concerned.
MarketWatch's David Weidner last week addressed some competition creeping into Facebook's world. In his article "Here's the app that could kill Facebook," Weidner detailed how an up-and-coming app could actually threaten Facebook's hold on social networking.
Tack this on to the list of reasons to avoid Facebook stock - in case you needed any more.
Path: A Facebook Threat?The app in question is called Path.
It's only been two months since Facebook's (Nasdaq: FB) long-awaited May 18 IPO. The day didn't exactly turn out as planned with Nasdaq's technical problems delaying trading and a measly one-day gain of 23 cents.
The result has been a lingering frustration among investors who hoped they were buying the next big tech stock - and are now in the red.
Since then, Facebook stock has fallen 24%.
A lot of expectations and answers should come with the Q2 earnings Thursday, but we're not so sure they'll be the answers investors have hoped to hear.
Here are three reasons we think the Facebook earnings report will disappoint.
Facebook Q2 earnings will come out after market close Thursday, in the Menlo Park, CA-based company's first report since going public.
There is no doubt that Facebook (Nasdaq: FB) would love to put its fiasco of an initial public offering behind it. But since the company's disappointing IPO was marred by technical glitches and concerns about its valuation, Facebook will be under intense scrutiny.
Analysts polled by Thomas Reuters expect Facebook Q2 earnings of 12 cents a share on revenue of $1.1 billion. Those are the minimum numbers needed to hit the lofty $100 billion valuation Facebook claimed it was worth when it debuted on May 18.
Since expectations have been lowered, analysts think Facebook earnings will hit the Q2 target.
"We think it is unlikely that Facebook will miss Q2 consensus estimates, which dropped after May 9's revised Form S-1," investing firm Wedbush said in an earnings preview report on the social network. "The underwriters likely advised Facebook to beat Street expectations for its first public quarter; this became more achievable now that estimates have declined."
Just as important as the numbers will be if Facebook delivers answers to all the questions that shareholders have been dying to ask.
Here are the three things- besides how Facebook stock reacts - you should watch when the Facebook earnings report comes out Thursday.