Start the conversation
Comment on This Story
Or to contact Money Morning Customer Service, click here.
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.
How Bad Will Facebook Earnings Be?
The recent stock slide come on the heels of a note Tuesday from Capstone Investments' Rory Maher who reported Facebook's massive user base dipped 1.1% in the last six months, citing an analysis of Facebook user data in more than 200 countries.
While Facebook had been boasting it is close to amassing a user base of one billion members, the fresh data shows the social networking giant will have to wait a bit longer to reach that milestone.
"Perhaps penetration in the U.S. is reaching maturity, which has implications for revenue growth and user growth. It's reason to be concerned," Maher said in an interview with Bloomberg.
In fact, the majority of analysts believe Facebook needs a facelift.
Chief among the heap of concerns is how the company will make money from mobile users, one of tech's fastest growing segments, and one area where Facebook was late to the game.
Late last month, Barclays' analysts were downright bearish.
"Facebook does not derive any meaningful revenue from its increasing mobile usage, and its ability to do so going forward is unproven,, " they said in a note to clients.
And then there is Facebook's valuation, which even for a tech company is lofty. Currently trading at 56 times 2012 earnings, that's a rich multiple no matter how you look at it.
Staying in the Lead
As the leader of social networking, being number one comes with unique set of obstacles. While Facebook's member count dwarfs rivals, staying at the apex is never easy. Google's social networking platform Google+ is gaining traction and users.
Facebook is strategizing how to attract more users, how to keep users interested and how to keep them coming back for more. The company is mulling ways to allow children younger than 13 to join, and there are talks that Facebook is working with Australia's Commonwealth Bank on a banking app.
While Facebook works on privacy issues and retaining the trust of its users, it needs to work on gaining the trust of shareholders.
Its unofficial motto is "Move Fast and Break Things." But Facebook stock is not yet a bull in a china shop, or a bull on Wall Street.
Facebook stock reached a low of $25.52 on June 6, and have managed to claw back some to its current $28.87. Still, that is a near 26% drop, a far cry from its debut price, and a good deal lower than the high of $45 hit on its first day of trading.
Option activity has picked up recently with most interest in the July 28 and 30 strikes. Not too much to get excited about given Facebook's present price.
Facebook earnings will be released after the close July 26 with a conference to follow at 5 p.m. EST.
Related Articles and News:
- Money Morning:
You Might be Invested in Facebook Stock and Not Even Know It - Money Morning:
Analysts Weigh on Facebook Stock as Quiet Period Ends - Money Morning:
The Facebook IPO Facts: The Good, the Bad and the Ugly - The Washington Post:
Facebook stock under pressure as earnings report approaches - CNN Money:
Will Facebook earnings be THAT bad?
I think it's crazy that people are not talking about this part of FB's advertising- the part where a business builds a fan page and then builds an ad to bring in more fans. This part of FB's revenue is all BS and I will tell you why. The fans that you get are all fake/BS fans. I own a vacation rental company that specializes in beach rentals. when i built my ad to get fans and populated it with the demographic features that pertain- all of the fans were from SE Asia, the baltic, India and other places like that. On top of that, i just checked my old posts and none of the fans i have ever paid for have shown any support for my page or have engaged. Also, i took a look at my website member pages and non of the paid fans have done anything on the site. I am not saying the fan page doesn't work. They can work great when you get those fans the good old fashioned way,if you get them from like interests, referrals etc.. they can be great and they stay engaged. What i am saying is the system that gets you paid fans on FB is a crock. They are a poor quality fan and a useless fan and represent nothing to your business but a number. The ad agnecies that the analysts speak too are missing the story here. When they track what is going on within this part of the ad budget they are checking in on fan growth, not quality of fan. That is why Wall Street thinks this is working OK because the ad agencies that specialize in helping big companies that are bigger revenue clients for FB are telling their customers and wall street, hey its doing great- company X brought in 15K new fans this quarter. They are not looking at the activity and the engagement of that paid fan which is total crap. People are in for a big surprise regarding owning FB's stock. This is the type of story that will rock a name when people find out the whole system that they invented that big companies spend millions of dollars on is a total sham. So once again, stay away from this type of advertising on FB. if you have friends that have fan pages on there that are paying to get fans to help market their product and get new eyeballs, do me this favor and check these following issues. 1) where is the fan from? better explained, if you are selling surfboards, having a fan in Sri Lanka isn't going to exactly going to move the meter. 2) Has the pad fan done anything on your website or have thy participated on any future blast that you put up on your fan page? i'm willing to be the activity is slim to none!
last but not least. check out some of your new fans personal pages! you will be amazed when you click on their friend page that they have little or no friends but like 10,000 likes! Now that is pretty cool, they are not engaging on FB like the standard user that FB envisions or the way you are used to using FB which is primarily social. They literally have no friends and have clicked like 10K likes but do not participate. Guy and ladies, i think it's a total sham and I think a big chunk of their revenue stream is garbage and when an analyst talks about this you are going to see this stock get rocked! Steer clear of FB. don't get burned!