Facebook Stock Price

Three Reasons the Facebook Earnings Report Will Disappoint

The Facebook earnings report for Q2 will be released Thursday after market close - meaning investors have a chance to see if concerns over Facebook's revenue and growth are warranted.

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.

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Facebook Earnings Report: Three Things to Watch

The Facebook earnings report due out Thursday is sure to bring excitement to this otherwise slow summer earnings season.

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.

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What to Look for in the Facebook Earnings Report

The most highly anticipated earnings report this month will come July 26 when Facebook (Nasdaq: FB) releases its first results as a public company.

While the event won't garner the same kind of fanfare Facebook enjoyed leading up to its IPO, the projected numbers are already attracting a great deal of negative attention, and Facebook stock has fallen in the midst of some dreary expectations.

According to data from Bloomberg News, Facebook is forecast to report revenue of $1.16 billion, while profit is expected to have fallen 10% to 11 cents a share amid a slowdown in sales. The whisper number is for earnings of 12 cents a share.

Predictions for the company have been slashed in recent weeks as concerns of a slowdown in sales and user defections have increased.

Those cuts have weighed on Facebook stock. Shares on Tuesday slipped for the sixth consecutive day, eked out a small gain Wednesday, and were lower again today (Thursday).

"People are concerned about the growth profile. More risk is being reflected in the lower stock price," Benjamin Schachter, an analyst at Macquarie Securities USA Inc., told Bloomberg.


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You Might be Invested in Facebook Stock and Not Even Know it

Investors who boast that they were smart enough to avoid the hype of investing in Facebook (Nasdaq: FB) stock might want to check their mutual funds' holdings before relishing in their bravado.

According to data compiled by investment research firm Morningstar for The Wall Street Journal, some 160 U.S.-based mutual and exchange-traded funds bought shares of Facebook in May. And since only some fund companies choose to reveal their holdings on a monthly basis, the ones that chose to invest in Facebook will be disclosed over the next two months as fund companies file quarterly reports.

"Even if John Q. Public didn't buy [Facebook] directly, he may own one of the hundreds of mutual funds that did," Geoff Bobroff, a mutual fund consultant in East Greenwich, RI, told The Journal.

What is notable in many cases about the purchases, including those by lead underwriter Morgan Stanley (NYSE: MS), is that some of the funds that purchased shares wouldn't normally invest in a high-growth technology company like Facebook. And some wouldn't invest such a high percentage, like Morgan Stanley that had at least seven funds with over 5% of portfolio holdings in Facebook stock.

"That's a huge gamble," Michael Kalscheur, a financial planner with Castle Wealth Advisors LLC, told The Journal. "Are you really going to put an IPO as a top-five holding in a fund?"

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Analysts Weigh in on Facebook Stock as Quiet Period Ends

Investors who want more analyst opinion on the Facebook stock price now have a lot more reading to do.

Today (Wednesday) marked the end of a 40-day quiet period for dozens of analysts who work for the 33 underwriters of the Facebook (Nasdaq: FB) initial public offering. That means these analysts now have released their first opinions and outlooks for shares of the social networking behemoth.

In an effort not to artificially inflate the stock price of a "hot" IPO, major Wall Street firms are prohibited for the first 40 days following a stock's debut from issuing analyst reports on stocks they underwrite. Smaller banks that are part of such an offering usually follow suit.

The universal opinion prior to Wednesday's Facebook releases was that the majority of analysts would "like" FB shares, and predict a 20% rally or more could be expected over the next 12-month period.

That was mainly the case among its lead underwriters, although some were bearish, bringing the average price target down. Price targets for analysts who provided them Wednesday ranged from $25 to $45, with the average $37.71.

But investors should consider the source before acting on the first analyst opinion they see. Some may be more interested in getting attention than guiding investors in the right direction.


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Why the Facebook Stock Price is Up

Over the past several days, the Facebook stock price has done a stark about-face.

In fact, Facebook (Nasdaq: FB) shareholders just might get the pop in price they have been hoping for ever since the social media giant debuted May 18.

Worries that Facebook's shares were overvalued and concerns that the company would not be able to grow revenue fast enough had pummeled shares lower by as much as 32% from the May 18 IPO price of $38.

After a disastrous IPO and a dismal showing in the weeks that followed, shares of Facebook are finally showing real signs of life. The tide may be turning.



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Why Facebook Stock Could Get a Boost from New Ad Strategy

Facebook (Nasdaq: FB) continues hunting for a major development that'll lure investors back to its stock.

In order to do that, it has to show it can appease both users and advertisers. The world's largest social network, which has amassed some 900 million users worldwide, earned $3.15 billion from advertising in 2011.

But the Menlo Park, CA-based company has to attract more advertisers to its site since they've become disenchanted with Facebook's lagging mobile ad strategy.

Worries that Facebook's ad revenue growth is not moving in tandem with its explosive membership have weighed on the stock. Since going public on May 18 at $38 a share, Facebook stock has slumped 26%.

Recently, the company debuted mobile ads and other services to buoy sales, but investors remain skeptical that the efforts will successfully boost revenue.

"Facebook's been having challenges coming up with effective advertising. The company is hoping to use that inventory on the right side of the page to deliver advertising that is more targeted," Debra Aho Williamson, an analyst at eMarketer Inc., told Bloomberg News.

That's why the company is introducing Facebook Exchange.

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Facebook IPO Fiasco to Cost Nasdaq $40 Million

The Facebook IPO mess has become a costly ordeal.

After market close Wednesday the Nasdaq OMX Group announced it will pay $40 million in compensation damages to brokerages that lost money because of the Facebook (Nasdaq: FB) IPO fiasco.

Facebook's epic debut on May 18 was marred by technical glitches at its home exchange, the Nasdaq. After a great deal of anticipation, a rock-star like roadshow, and repeated SEC filings and re-filings, shares were finally priced at $38 each.

But there were problems from the first trades went off around 11:30 a.m. EDT. Executions were late, allotments askew, and prices delayed. Investors who did manage to get shares were disappointed when Facebook stock barely finished above the IPO price on its first day of trading, closing at $38.27.

Many investors felt misled and cheated. Scores have joined class action law suits against Facebook, Nasdaq, and the 33 underwriters.

But Nasdaq's recompense is being called a public relations ploy and does little to help individual investors.



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Facebook Stock Price Hits Low – Can this New Strategy Help?

After hitting a new low of $25.75 on Tuesday, Facebook (Nasdaq: FB) stock slid further Wednesday morning despite a nice rally for U.S. equities.

With the Dow up nearly 90 points right after the opening bell, Facebook shares edged down to $25.68 in early morning trading, reaching another new low. Shares now sit more than 30% below the IPO price of $38.

Weighing on Facebook Wednesday was news that the Nasdaq Omx Group (NDAQ) will tell brokers exactly how it will recompense investors for the myriad trading problems during the Facebook IPO frenzy. Problems at Nasdaq contributed to order issues that prompted several class action law suits.

But what drew more attention from investors was a comment by Ironfire Capital founder Eric Jackson. The analyst appeared on CNBC's "Squawk on the Street" program Monday and said that Facebook will lose its dominance as a social network in less than 10 years.

Jackson highlighted Facebook's inability to make leeway in the thriving and prominent mobile arena, as well as the stock's steady tumble since the company's epic IPO.

The comments have triggered suspicions that Facebook will suffer the same fate as MySpace, once the dominant force in the social networking circle, and Yahoo (Nasdaq: YHOO), once a leader in Internet search.

"In five to eight years they are going to disappear in the way that Yahoo has disappeared," Jackson said. "Yahoo is still making money, it's still profitable, still has 13,000 employees working for it, but it's 10% of the value that it was at the height of 2000. For all intents and purposes, it's disappeared."

Now Facebook has a new strategy to increase its reach - and its profits - but it's one that will likely raise some eyebrows.

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Facebook Stock Options: Bears Come out to Play

It's been an interesting ride so far since the Facebook stock options left the starting gate Tuesday.

Expected to hit the 400,000 contract mark on their first trading day, the options closed with a total volume of 369,478 contracts, according to The Options Clearing Corp (OCC). Only Apple Inc.'s (Nasdaq: AAPL) options had more trading volume than Facebook on Tuesday.

Unfortunately, the underlying Facebook (Nasdaq: FB) stock price wasn't as charming as it dropped under $29 a share for the first time Thursday. That's more than 23% below its IPO price of $38 on May 18.

The options market has highlighted investors' lack of faith in the Facebook stock price.

Put options, usually recognized as a bearish bet, give a holder the right to sell shares at a specific price by a certain date. Call options, on the other hand, are usually considered a bullish bet and give the holder the right to buy shares at a specific price.

In its first three days of trading, put volume has continued to outdo call volume. It appears that everyone is down on this stock.

Until Facebook stock stops falling, most investors remain too wary to buy.

"Short-term we are still cautious but there should be reasons for optimism later this year and next," Pivotal Research analyst Brian Wiesner told Reuters.

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Facebook Stock Options: Proceed with Caution

As Facebook (Nasdaq: FB) continues to try to save face after its IPO flop and the myriad mess ups that followed, investors now have a new way to trade the most talked about stock this year.

Options on the social networking giant started trading today (Tuesday) on the NYSE Amex. BATS Options Exchange will list options starting Wednesday.

So far, staying with the Facebook stock theme, investor interest has been high.

As trading began this morning, volume for puts exceeded calls by 1.29-to-1, according to data compiled by Bloomberg News. More than 62,000 puts, giving the right to sell, traded by 11 a.m. June $30 puts were the most active contracts, with volume at 10,974, followed by June $34 calls and June $32 calls.

"Facebook options, like the stock in its debut, post impressive first day volume so far," explained the Dow Jones' Kaitlyn Kiernan to The Wall Street Journal. "Facebook looks poised to become one of the most-traded corporate options today, with a total of 17,232 options - 7,476 puts and 9,756 calls traded in the session's first 15 minutes."

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Facebook Stock Price: Is Mark Zuckerberg Losing Sleep Over This?

Everyone's eyes are on the falling Facebook stock price, but CEO and founder Mark Zuckerberg remains silent on the issue.

Facebook (Nasdaq: FB) stock is down about 17% from its $38 IPO price. But Zuckerberg has not commented publicly or issued a company statement, according to The Wall Street Journal.

Silicon Valley rumors tell us that Facebook employees have been told to concentrate on work and not comment on the IPO fiasco.

Meanwhile, Nasdaq criticism continues and lawsuits pile up as investors who are left with more FB shares than they wanted - worth less than they bargained - feel cheated.

And Wall Street is left to bet on when or if FB stock will rebound.



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Five Ways to Avoid the Next Facebook IPO Fiasco

On the heels of the Facebook IPO fiasco, many investors are wondering how they can find the next best thing and avoid getting "facebooked" in the process.

Tall order? Not really.

First, look for companies with ideas that can be applied across a wide variety of industries.

If I had said this five years ago, you'd be looking for Internet- related startups or companies that can do "it" better, faster or cheaper.

Going forward however, I think the true innovation will be exponential progress that's made linking living systems with their digital counterparts. Everything from synthetic biology to computational bioinformatics will grow a lot more rapidly than the broader markets.

So will key markets related to healing human illness, solving hunger and figuring out how to deliver potable water to broad swathes of the planet.

No doubt there will be tremendous ethical challenges along the way, but I believe we will see the line blur between what's needed to live and how we actually live our lives.

Though it's hard to imagine given the state of the world at the moment, I believe a fair number of the best up- and- coming investments will be outside the traditional first- tier markets of the United States, Europe and Japan.

In fact, I'd bet on it.

Second, don't confuse the ability to organize or share information with the ability to generate revenue

One might lead to the other but they are not the same thing.

The way I see it, Facebook is a classic example of everything you don't want in a business. It is 900 million users who spend an average of $1.32 a year. Compare that to Amazon.com, which clocks in at a much more valuable and consistent $36.52 per person.

Call me crazy, but I don't think Facebook stock will see the bottom for a while. As I wrote last Friday, at best Facebook is worth $7.50 a share.

Revenue is slowing. Facebook doesn't dominate the mobile markets that are becoming the preferred consumer channel for tens of millions of people. And, in what is perhaps the death knell, startups are already cannibalizing Facebook's user base.

The ability to "like" somebody is really no different than signing their yearbook in high school --only you're using a computer and the Internet to do it.

Third, hunt for fringe thinkers working in their garages.

It's not enough to think differently. The next big things will come from those thinkers operating on the fringes of what the rest of us consider normal.

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Facebook Stock is Worth $7.50 a Share at Best

Duh on you if you bought the Facebook IPO.


Double duh if you're thinking of buying Facebook stock now that it's fallen to $32 a share and lost $17.16 billion off its initial $104 billion valuation.

The company is only worth about $7.50 a share. And, no. That's not a typo. There is no missing zero or a placeholder.

That's reality. What is ludicrous is that Morgan Stanley and Facebook executives thought the company merited a $104 billion valuation at 100 times earnings.

As my good friend Barry Ritholtz pointed out recently, both Apple (Nasdaq: AAPL) and Google (Nasdaq: GOOG) debuted at about 15 times earnings. Today they trade at 13.6 and 18.2 times earnings and 3.75 and 4.9 times sales respectively.

As I type, Facebook's market cap is $86.84 billion and its price to sales is ridiculously high at 21.01. I think that's way out of line.

So what should the numbers be?

Try this on for size. If we use Google's price to sales ratio of 4.9 (and I am being generous here for discussion purposes), that equals a total market cap of $20.24 billion or 76.68% lower than where it's trading today.

With 2.74 billion shares outstanding, that's equal to only $7.39-$7.50 per share.

No doubt I'll get the evil eye from the Facebook faithful and Morgan Stanley for saying this, but think about it.

Revenue is already slowing and the company does not and cannot possibly dominate the mobile markets that are becoming the preferred channel for millions of people.

Worse, startups are already cannibalizing Facebook's user base as concerns over privacy and who likes who mount.

Companies like General Motors (NYSE: GM) are deciding not to renew their advertising. This is going to hit Facebook to the tune of $10 million a year for the loss of GM alone.

More will undoubtedly head out the door for the same reason, since Facebook friends don't necessarily translate into revenue.

Corporate buyers are beginning to figure out that advertising on Facebook is simply not cost effective versus other media alternatives - gasp - including good old fashioned television and radio advertising, billboards and tradeshows.

Facebook Stock: At the Mercy of the Merely Curious

Many people think this isn't a big deal. They couldn't be more wrong.

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Is Facebook (Nasdaq: FB) a Replay of the AOL/Time Warner Deal?

I hope you didn't buy shares of Facebook (Nasdaq: FB). The valuation was always too aggressive.

And increasing both the price and amount of Facebook stock at the last moment ensured that both underwriters and retail investors ended up with far more shares than they bargained for.

In fact, the Facebook fiasco reminds me of another deal that marked the peak of the dot-com boom.

No, not the ineffable and rather sweet Pets.com- their IPO was far too small a deal to have genuine market significance.

Instead I'm talking about the AOL and Time Warner merger announced on January 10, 2000.

Like Facebook, the deal was sold as a big success. It was only later that it quickly became clear that AOL had sold itself at the absolute peak of the market.

From there on out it was all downhill as the storied merger practically top-ticked the market.

Before Facebook There Was AOL

AOL had built up a nice business from "dial-up" Internet access, but it was already obvious by January 2000 that the arrival of broadband Internet would make for a difficult transition.

As such, AOL's market capitalization of around $200 billion was purely the result of the frothy market of 1999.

Nevertheless, that rich valuation enabled AOL to become the senior partner in an acquisition of the Time Warner media conglomerate, getting 55% of the merged company in a deal valued at $350 billion. It was the largest merger in U.S. history.

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