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Wednesday's "Earnings Beat" Makes This The Perfect "Bad-Market" Tech Stock

In last week’s Private Briefing report Our Experts Show You the Stocks to Pick in a ‘Stock-Picker’s Market’,” Money Map Press Chief Investment Strategist Keith Fitz-Gerald identified SanDisk Corp.(NasdaqGS: SNDK) as one of three stocks to buy in the face of the stock market sell-off.

And now we see why…

  • Facebook Stock

  • Why the End of the Facebook Lockup Period is a Big Deal (Nasdaq: FB) On Thursday morning, the first lockup period of some 1.91 billion shares of Facebook (Nasdaq: FB) ends, releasing even more of the battered stock into a market with few interested buyers.

    The end of the lockup period (used to reduce trading volatility immediately after an IPO) will kick off with up to 271 million shares flooding the market on the sell-side. More shares will become available over the next few months, compared with less than 500 million currently authorized for trading.

    Investors who got in early and paid a mere pittance for the stock may race to cash in despite Facebook's steady decline since its legendary May 18 initial public offering at $38 a share. Since the fabled IPO, which morphed into a trading fiasco, shares have lost some 40% of their value.

    The flood of shares ready to be unlocked is off-putting for some potential buyers.

    "It's one of the No. 1 issues on investor's minds right now," Herman Leung of Susquehanna International Group told Bloomberg News. "Even the investors that I talk to who want to buy the stock and like the company are not sure if they can stomach the lockups."

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  • Sorry…Facebook (Nasdaq: FB) is Still Only Worth $7.50 a Share The technorati took me to task. So did Wall Street.

    They were agitated by an article I wrote in May explaining why the world's most hotly anticipated IPO, Facebook (Nasdaq:FB), was worth a mere $7.50 a share at best.

    "Out of touch," one of the critics said. A "luddite" charged another.

    "Doesn't grasp the significance of so many users," one Wall Street insider opined--who happened not coincidentally to work for one of Facebook's investment bankers.

    Since then the social media darling has fallen another 31% to nearly $22 a share. Ten weeks later, Team Hoodie hasn't done much to merit an upgrade either.

    Sorry guys...Facebook is still only worth $7.50 a share - likely less.

    Here's why.

    The Cold, Hard Facts for Facebook

    At the time I reasoned that Facebook's valuation simply didn't merit the 100 times earnings IPO price of $38 a share based on comparable figures from Google (Nasdaq: GOOG) and Apple (Nasdaq: AAPL).

    But there were a host of other factors as well.

    I cited falling revenues, a lack of control over the mobile market channel, increasing distrust from customers who were voting with their feet and the concurrent departure of major advertisers like GM which will cost Facebook an estimated $10 million a year in revenue alone.

    I also posited the assumption that Facebook would be unable to maintain the 100% plus growth that many investors believed was baked into the proverbial cake.

    Google couldn't. Apple couldn't. And both of them are real businesses.

    That's the key...real businesses.

    Fact is, Facebook still hasn't figured out what it wants to be when it grows up.

    Despite the fact that CEO Mark Zuckerberg does have some excellent advisors, the company isn't going to be able to hide the fact that its "business" is nothing more than a colossal time-wasting collection of personal interest items for much longer.

    Other problems abound, too. All of them point to a lower share price.

    [ppopup id="70925"]To continue reading please, click here...[/ppopup]

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  • The Lesser of Two Evils: Facebook vs. GM If you had to buy either Facebook Inc. (Nasdaq: FB) or General Motors Co. (NYSE: GM), which are both down 40% from their recent IPOs, what would you do?

    On Wednesday Money Morning's Shah Gilani appeared on Fox Business' "Varney & Co." to tackle that question.

    With GM trading around $20 and Facebook stock hovering around $21, the share prices are both at or approaching 52-week lows, but which is the better value?

    Gilani's answer may surprise you.

    Watch the entire accompanying video to get a full analysis on each company.

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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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  • Facebook Earnings Report Gives Investors Zero Reasons to Stick Around The first Facebook earnings report since the company went public was released today (Thursday), and the numbers came in right in line with lowered, underwhelming expectations.

    Facebook met earnings per share estimates of 12 cents on revenue of $1.18 billion. Analysts had expected EPS of 12 cents on revenue of $1.16 billion.

    Estimates had been slashed several times and many experts did not think Facebook (Nasdaq: FB) would miss these lowered estimates - especially after is horrible IPO already delivered a colossal disappointment.

    But the fact that earnings forecasts were so low made the fact that the company beat them a non-event.

    "These earnings are meh," one equities analyst told Business Insider.

    Another problem with the earnings report: There were no real clues as to how Facebook was ever going to make real money.

    Facebook has had a hard time turning users into profits as more people use Facebook via mobile, an area Facebook has yet to monetize - and a key issue investors want addressed in today's earnings call.

    "Everything is moving toward mobile," Debra Williamson, an analyst at eMarketer, told USA Today. "Gaining revenue from mobile and improving that experience are two things that Facebook absolutely has to focus on in coming years."

    Reports surfaced Thursday that Facebook hired a team of former Apple Inc. (Nasdaq: AAPL) employees to completely redesign the Facebook iPhone app, which will no doubt include some of its new advertising plans. The aim is to generate more revenue from its growing mobile user base.

    But it's still unclear whether or not Facebook can do that.

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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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  • 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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  • How to Trade the Obamacare Ruling During a visit today (Wednesday) to Fox Business' "Varney & Co." program, Money Morning's Keith Fitz-Gerald tackled the issues surrounding the Obamacare ruling and how investors can trade the news.

    Since the U.S. Supreme Court is scheduled to announce its Obamacare ruling tomorrow, we wanted to share with you this Q&A session with Keith on what you need to know about the decision.

    Keith also shared what he thinks of Facebook stock as the market is flooded with analyst opinions from the underwriting firms.

    You can see all of Keith's analysis in the video below.

    Q, from "Varney & Co." host Stuart Varney: The Obamacare ruling is imminent. Will insurance companies tank if it's repealed, and how would you trade that?

    A, Keith Fitz-Gerald: I can see this going two ways...

    1)If it's upheld, insurance companies will make bank, but businesses offering services to small and mid-cap companies that are likely to be hamstrung are going to do better. That includes Paychex Inc. (Nasdaq: PAYX) or Express Scripts (Nasdaq: ESRX), for instance. Both will help small companies spend their healthcare dollars more efficiently.

    2)If struck down, big insurance companies will have to retool and restructure as they are the ones that hold the biggest stake in this debate. It's a little late to make that bet today, but when the ruling is announced we'll have some clarity and can make a decision then.

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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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  • Will the Facebook Stock Price Overcome This Latest Concern? Facebook (Nasdaq: FB) and its struggling stock price have been in the spotlight since the company's IPO, but rarely for good news. This week started no differently.

    Besides its poor stock performance, Facebook already has been blamed for halting this year's IPO market. There hasn't been an IPO since Facebook debuted on May 17.

    Facebook also is taking heat for wreaking havoc on Nasdaq's reputation after technical glitches marred Facebook's debut. Nasdaq revealed last week that it will pay out $40 million in compensation damages to brokerages that lost money during the IPO fiasco.

    Finally, many investors claim they were misinformed on Facebook stock's first-day potential, and have initiated a class action lawsuit against the underwriters.

    Now the most recent bad news has cast even more doubts over whether or not Facebook can perform as well as investors expected.

    Has Facebook's Growth Reached a Ceiling?

    Over the weekend The Wall Street Journal ran a report on Facebook's growth slowdown, especially in the United States.

    Citing market research firm comScore Inc. (Nasdaq: SCOR), the report indicated unique visitors to the Facebook Website in the United States increased just 5% in April from a year earlier.

    That was the lowest U.S. user growth rate since comScore started tracking the data in 2008. It compared very poorly to the data from the past two years, down from 24% growth in April 2011 and 89% in April 2010.

    The amount of time Facebook users spend per month on the site increased, but also at a slower rate than before. Facebook users' time-on-site was up 16% from a year earlier, compared to a 23% increase in 2011 and 57% in 2010, according to comScore.

    "The assumption that Facebook can maintain the 100% growth it reported Q2 2011 is no more plausible than the 45% growth it reported [earlier this year," said Money Morning Chief Investment Strategist Keith Fitz-Gerald after the stock started trading in May. "Google couldn't. Apple couldn't. And both of them are real businesses."

    It may be a matter of numbers limiting Facebook's growth rather than a changed perception or heightened dislike of the company. Facebook is estimated to have already captured 71% of the 221 million U.S. Internet users, leaving little room for U.S. growth.

    That is troubling as the U.S. accounts for approximately 56% of Facebook's 2011 ad revenue of $3.1 billion, according to the company's regulatory filings.

    Morningstar analyst Rick Summer stated that Facebook cannot expect to have the same post-IPO growth as Google Inc. (Nasdaq: GOOG), due to the fact that Facebook already has a dominant market share of its industry and a very high number of Internet users.

    Summer suggested that increased ad pricing could drive future growth.

    "Facebook is already a dominant Web platform and they've got significant Internet penetration today," said Summer. "Ad pricing is clearly going to be where their growth is going to come from."

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