FB Stock Price
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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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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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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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