Facebook Inc Nasdaq: FB
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Why Facebook Stock Soared After Earnings Report
Facebook stock (Nasdaq: FB) was up almost 10% in the first 30 minutes of after-hours trading today (Tuesday) after the release of its third-quarter earnings report, its second as a public company.
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.
In addition to the earnings beat, the following highlights helped Facebook stock soar after the earnings release:
- Mobile users increased 61% year-over-year
- Monthly active users were up 26% year-over-year
- Daily active users rose 28% year-over-year
"As proud as I am that a billion people use Facebook each month, I'm also really happy that over 600 million people now share and connect on Facebook every month using mobile devices," said Zuckerberg. "People who use our mobile products are more engaged, and we believe we can increase engagement even further as we continue to introduce new products and improve our platform. At the same time, we are deeply integrating monetization into our product teams in order to build a stronger, more valuable company."
But this positive vibe doesn't mean Facebook's earnings problems are solved.
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Will a Poor Facebook Earnings Report Seal the Stock's Fate?
The third-quarter Facebook earnings report will come out Oct. 23 after the markets close, and the results are looking increasingly dismal.
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.
Since then, a bevy of analysts have become more bearish on the social network's near-term outlook.
Two analysts have cut estimates, and none have raised projections.
Facebook is now expected to earn 11 cents per share on revenue of $1.23 billion for the third quarter and the average estimate for Facebook's 2012 earnings is 48 cents a share.
And next year's forecast isn't any brighter.
In just the last month, half a dozen analysts have slashed next year's earnings estimates for the company. The current lackluster consensus is for Facebook to earn 62 cents a share in 2013, according to data from MarketWatch.
With its disastrous IPO no longer an excuse for fumbled earnings, the focus has shifted.
Now a public company, FB shareholders want to see growth, escalating earnings, analyst upgrades, insider buying, and a rising stock price.
Instead, they've gotten a stock that might never rebound.
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Facebook Stock Won't be Saved by this "Useless" Idea
Facebook Inc. (Nasdaq: FB) announced today (Thursday) it had finally amassed its one billionth member.
While the company celebrated the landmark number, many analysts simply shrugged it off. So did Facebook stock, which was down about 0.4% by 2 p.m.
As MarketWatch pointed out, "it's great to have one-seventh of the world's population in your network, but Facebook will have to translate that to the bottom line to sustain its upward momentum of late."
Or, as Money Morning wrote a few weeks back, "Congrats on one billion Facebook users... who buy nothing."
Facebook, in order to change that flaw, released a new plan this week to make money off its enormous subscriber base.
But here's why Zuckerberg and team should go back to the drawing board.
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Why Facebook Stock Has Much Farther to Fall
After Facebook Inc. (Nasdaq: FB) CEO Mark Zuckerberg addressed the public earlier this month to stem concerns over the stock's steep and steady fall, Facebook shares enjoyed a mild rally.
That was fun for investors while it lasted.
Facebook stock Monday renewed its descent, dropping 11% before stabilizing a bit to finish the day down 8.3% at $20.79.
Monday's intraday decline was the steepest since July 27. It was so sharp it tripped Nasdaq's circuit breakers meant to shield investors from short-seller manipulation.
Sparking this week's selloff was a fresh report from Barron's that said the company is overvalued. Renewed concerns over how quickly the social-networking behemoth can capitalize on revenue from the exploding number of users who access the site via mobile devices and tablets contributed to the drop.
Tuesday morning, the selling continued.
Before the recent selling spree, shares of the Menlo Park, CA-based company had given back some 45% since its hugely hyped initial public offering on May 18.
But that decline isn't enough.
Barron's gave Facebook a best-case scenario of $15 per share.
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While Facebook Struggles, These Rivals Steal Market Share
As Facebook (Nasdaq: FB) continues to struggle with growth and mobile strategies, its rivals keep moving forward in both areas.
GREE, Japan's $4.7 billion online media behemoth and rival to Facebook and its gaming counterpart Zynga Inc. (Nasdaq: ZNGA), moved further into Facebook's territory Monday with the purchase of social gaming company App Ant Studios.
GREE already enjoys a prominent position in social media. It's quickly gaining on other social networks, namely Facebook, since the bulk of its users already access the site via mobile devices - an arena in which Facebook lags.
With a strong focus on selling virtual goods, and with a variety of other superior services and mobile games, GREE is vying for sustained growth by expanding beyond its home turf -and is succeeding.
"GREE strives to build the world's leading global mobile gaming ecosystem. The acquisition of App Ant Studio will help GREE reach its goal of having 1 billion users worldwide as it expands its robust portfolio of games on GREE Platform," a company statement read. GREE gushes the new Platform will deliver exclusive social gaming experiences, in addition to offering developers access to a rising and engaged worldwide audience.
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If Only Zuckerberg Chose a Catchier Facebook Ticker Symbol
If only CEO Mark Zuckerberg had used a bit more imagination when cooking up the Facebook Inc. (Nasdaq: FB) ticker symbol, its stock might have fared a little better.
Sound crazy? Maybe, but several studies have shown that clever, pronounceable stock symbols - think Yum! Brands Inc. (NYSE: YUM) and Southwest Airlines (NYSE: LUV) - do better in the market.
The phenomenon is particularly true for IPOs, with the "fun name halo" extending about 10 days out from the stock's first day of trading.
Companies that choose a ticker symbol that doesn't form a pronounceable word - yes, like Facebook (Nasdaq: FB) -- often struggle. Generally speaking, the more jumbled the letters, the worse a stock does.
"[Our] research shows that people take mental shortcuts, even when it comes to their investments, when it would seem they would want to be most rational," Professor Daniel Oppenheimer, who co-authored a 2006 Princeton University study of the subject, told Psych Central.
While the academics who have studied this have not conclusively nailed down the cause, most suspect it has to do with something called "fluency," or how easily a person can process information.
People are simply drawn more to a catchy ticker symbol like YUM than a drab one like FB.
"It is possible that [people] are initially more attracted to fluently named stocks, that they pay particular attention to those stocks, or even that they favor those stocks because they have developed an association between easily processed names and success," Adam Alter, Oppenheimer's research partner, told The Wall Street Journal.
The Science Behind Clever Tickers
Naturally, not every stock with a clever ticker symbol outperforms and not every stock with a subpar ticker symbol underperforms. But the broad data show a surprisingly strong relationship between a ticker and how well the stock does.
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