facebook stock quote
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If this Works, Facebook Stock Could be the "Buy of the Decade"
Facebook stock is one of the most controversial stocks in existence today.
With one billion users, investors have been waiting to see if Facebook's business model can pay off, especially after its IPO tanked.
Today, Money Morning's own e-commerce director, Bret Holmes, is going to give you the inside scoop on Facebook stock. Not some theoretical financial analysis, but what the future looks like for Facebook, from a guy who understands e-commerce and can explain how Facebook stock could be the "buy of the decade" for investors.
Click here to watch the interview.
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What is Facebook Home – And Will it Do Anything for Facebook Stock?
The much anticipated announcement from Facebook today (Thursday) has left us investors with two questions.
The first, what is Facebook Home?
The second, is this finally the development that CEO Mark Zuckerberg needs to rally investors behind Facebook stock, and lift it back above its IPO price of $38?
The social-networking giant Thursday unveiled Facebook Home, a customized homescreen for Android smartphones. Facebook Home highlights all things Facebook - a dream come true for anyone who loves the social media tool.
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Facebook IPO Deal Leaves Wall Street Seeing Red
The U.S. Securities and Exchange Commission on Monday approved Nasdaq's plan to pay $62 million in compensation to brokers for mishandling the Facebook IPO. The Nasdaq missteps during Facebook's (Nasdaq: FB) debut cost Wall Street a collective $500 million and firms have fought to recoup those losses.
The amount was cleared by the SEC after Nasdaq offered to pay more than is allowed under its existing bylaws. As a self-regulatory organization, the Nasdaq enjoys certain legal protections which could have resulted in a significantly smaller settlement.
Nasdaq proposed the voluntary $62 million as more firms claimed that the exchange misrepresented facts of what went wrong in trading that day. The amount is much more than the $3 million cap its rules permit for technical glitches.
Not everyone's on board with the decision. Citigroup Inc (NYSE: C) and UBS AG (NYSE: UBS) urged the SEC to reject it, saying losses within their market-making units exceed $62 million. In fact, Citigroup raised the immunity argument last August in a letter to the SEC.
"Market participants suffered hundreds of millions of dollars of losses as a result of Nasdaq's profit-driven conduct prior to and during the Facebook IPO, not a result of protected regulatory activity by Nasdaq, or routine system failures. Nasdaq should not be permitted to hide behind regulatory immunity," Citi wrote in a letter to the SEC.
UBS, which claims to have lost more than $350 million, told the SEC brokers should be made whole. Many agree.
"Why should the banks and brokers be left holding the bag for Nasdaq's snafus?" Scott Sales, a lawyer at Paul Hasting LLP who handles corporate listings and is not involved in the settlement, told The Wall Street Journal last month.
The SEC acknowledges the proposal won't compensate for all losses, but added it provides "significantly more compensation for eligible claims, outside of litigation, than would otherwise be available."
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Can Mobile Really Drive a Facebook Stock Rally?
One of the reasons Facebook stock (Nasdaq: FB) hasn't fared better since it started trading - it's off 25% from its $38 IPO price - is the company's failure to profit from increased mobile activity among users.
But now, less than a year after Facebook's acknowledgement that it needed to monetize its growing mobile member usage, the company bills itself as a truly mobile company.
"After initially struggling, Facebook has now mastered mobile, and I think the company has a bright future," CNBC's Jim Cramer said.
The company has made headway in the arena. Mobile monthly active users increased to 680 million in January, up 57% from a year earlier.
And mobile ad revenue tripled from the third to fourth quarter and now comprises 23% of total ad revenue.
"Over the last six months, while the public has pondered its mobile strategy, Facebook has quietly emerged as the superpower of application discovery, and is progressively playing a powerful role in reshaping e-commerce, media and advertising on mobile platforms," wrote All Things D. "Facebook's new products - ranging from open graph and timeline to mobile installs - are reshaping how brands, companies and app developers can connect with their audiences and facilitate discovery in a crowded app world."
More than half of Facebook users now access the site via mobile devices even though the on-the-go site lacks many features included in the PC version.
Nonetheless, the shift has been dynamic and is chipping away at FB's desktop income stream, which generates greater, but now waning, revenue.
All Things D says that as Facebook's mobile infrastructure develops, the social media behemoth is poised to transform mobile's future much like Google's (Nasdaq: GOOG) Adwords changed the face of search.
So does this mean the Facebook stock price will start to reward investors?
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Facebook Stock Downgrades Keep Pouring In
They say third time's the charm, but no such luck for Facebook stock, which fell even though the company's third earnings report since going public beat expectations.
The numbers failed to charm Facebook Inc. (Nasdaq: FB) investors who expected the report would offer more to like, and analysis who found plenty of concern in the expenses.
The social networking giant posted earnings per share of 17 cents, better than the consensus of 15 cents. Revenue came in at $1.59 billion, up 40% year over year, and ahead of forecasts for $1.53 billion. However, fourth quarter profit slumped 79%, dragged down by higher costs.
The Menlo Park, CA-based company's advertising business grew at its quickest pace since before the company's initial public offering (IPO) on May 18, 2012, and contributed to the robust revenue growth.
Revenue growth has been a major concern among investors since the initial public offering, leaving them to question if the company can make money off its massive 1 billion members.
Immediately following the Q4 earnings release after the close Wednesday, shares slumped more than 9%. Shares ended the volatile after-hours session down some 4% at $29.98. The sell off continued Thursday with FB shares down 3.52 % in early morning trading.
Shares had gained some 60% since November, but it looks like the Facebook stock rally for now may be over.
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Facebook Stock Fails to Rally as Lockup Ends
Facebook stock (Nasdaq: FB) fell more than 5% Friday as some 156 million shares held by early insiders and employees were freed from a lockup period.
It marked the fourth time a torrent of the social networking giant's shares were let loose for trading since the company's hugely hyped initial public offering (IPO) on May 18 at $38 a share.
The reaction to the sizable release of shares has been mixed.
Facebook stock fell to $28.61 Friday and ticked lower in afterhours trading. Option activity was also bearish, with puts still exceeding bullish calls over the next three months.
The fall reversed the surprising upward trend enjoyed amid the third and largest lockup expiration. On Nov. 14, 777 million shares, or about one-third of shares outstanding, were freed. Investors and analysts were bracing for the worst, but shares soared 12.5%.
In fact, Facebook stock gained more than 40% over the month's time between the third and fourth lockup expiration.
During the first lockup expiration on Aug. 15, when 270 million shares were set free, "smart money" and early investors quickly dumped shares. Over the course of the third lockup expiration on Oct. 29, with 234 million shares unleashed, shares slid 4%.
But now that four of the five lockup period expirations are over, more analysts are bullish than before.
"With improved visibility on the company's mobile transition, the majority of the lock-up expirations now behind us, and the potential opportunity from new products, we remain positive on Facebook shares," wrote Analyst Arvind Bhatia at Sterne Agee, who issued a "Buy" rating on Nov. 27, with a price target of $32.
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Facebook Stock Rises Despite These 852 Million Reasons to Fall
It's difficult to think that an additional 852 million shares of Facebook stock hitting the market wouldn't weigh on the already struggling share price.
That's why, for the third time in nearly as many months, Facebook Inc. (Nasdaq: FB) on Wednesday braced for what could have been the largest selling spree yet to hit the social networking giant.
Scores of early investors and employees were at liberty to sell 778 million shares. Another 31 million in restricted stock, awarded to employees who joined the Menlo Park, CA-based company prior to 2011, were also unbound, along with 48 million shares held by former employees.
The staggering number is almost equal to Facebook's existing 921 million share float, according to data from the company's most current filing with the U.S. Securities and Exchange Commission.
But, a strange thing happened.
Instead of falling amid the torrent of new shares, Facebook's stock rose Wednesday.
Right after the opening bell on Wall Street and for the first half hour of trading, the stock enjoyed a 10% rally. By 2 p.m., it was up nearly 12% at $22.22.
Why? Morningstar analyst Rick Summer says the result could have been that investors were planning to buy today after the price tumbled, and piled into the stock anyway.
"Certainly there was a delay and pent up demand in shares," Summer told ABC News.
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Congrats on One Billion Facebook Users… Who Buy Nothing
Facebook (Nasdaq: FB) is on the cusp of amassing one billion users, unarguably a milestone.
The last official tally of Facebook users was 955 million. Employees have become giddy in expectation of reaching the one billion mark any day now.
But, they might want to hold off tossing confetti, because the momentous occasion will also shine a bright light on the social network's shortcoming.
No matter how many users Facebook acquires, if it can't sell anything, the landmark number is useless.
As Owen Thomas of Business Insider wrote, "Bottom line: One billion users isn't cool. You know what's cool? Two billion."
Facebook Sales Estimates Slashed
The failure to monetize that many subscribers is a shame because Facebook's massive user base is an advertiser's dream if effective - but there have been no signs of future revenue growth.
That's why market research firm EMarketer Inc. recently slashed its projections for the Menlo Park, CA-based company from $6.1 billion in annual sales to $5.04 billion. Facebook continues to struggle for advertising growth, in particular the fast growing mobile market.
[ppopup id="70925"]That’s why Facebook stock should really be trading for this amount. [/ppopup]
An increasing number of Facebook users are now accessing their accounts via smartphones and other mobile devices, an area where Facebook collects a great deal less in ad revenue than it does on desktop access.
Facebook enjoyed an 88% revenue increase in 2011. EMarketer estimates Facebook revenue will rise only 36% this year and 31% in 2013.
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Another 1.7 Billion Reasons to Avoid Facebook Stock
As if there weren't enough factors to make Facebook (Nasdaq: FB) stock unattractive, there's a flood of free shares about to hit the market that could make it even harder to raise the share price.
In two weeks comes the first expiration of "lock-up" agreements, meaning certain investors barred from selling their shares will then be able to do so. Typically employees and big investors are required to hold shares for a certain time period after an IPO. This is done to reduce selling pressure and the chance of a mass exodus as soon as the stock starts trading.
But now some of those investors' shares will be freed up, and they want to cash in.
Editors Note: Why Facebook’s “Big No-No” Could Lead To Its Big Collapse [ppopup id="70925"]Click here[/ppopup].
Nearly 1.7 billion shares of Facebook stock will enter the market over the next few months, starting in mid-August. That is more than four times the number of shares now floating on exchanges.
"It's like a train coming around the corner toward shareholders, so they better get out of the way, Francis Gaskins, president of research firm IPOdesktop.com, told the Los Angeles Times.
The first batch of 268 million shares will be freed up in mid-August, followed by 192 million more shares in mid-October, and a whopping 1.2 billion shares will be let loose in mid-November.
Granted, a slew of those shares will not be sold, but the fresh torrent of shares to be set free far outnumbers the 421.2 million shares Facebook sold in its fabled IPO.
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Will a Weak Facebook Earnings Report Open Doors for these Competitors?
We know investors will want a few key details from today's Facebook earnings report, like how much more user growth the site expects, if it can increase ad sales and how it'll tackle mobile usage.
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.
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