Investors were thrilled to see FB earnings improve from previous disastrous quarters, and their exuberance pushed Facebook stock above $30 a share for the first time since January.
But, before you think FB stock is now the hottest investment of 2013, take a closer look at what's going on.
First off, some of the gains are very likely thanks to a short squeeze. Heading into the release, some 39,754,124 FB shares were sold short, making it currently one of Nasdaq's most heavily shorted stocks.
Volume suggested a race to cover shorts was in play.
And despite the solid gains, Facebook stock still isn't trading over its May 2012 IPO price of $38, a level not seen since the famously flawed debut.
"Bottom line to me is Facebook may prove to be a great short-term trading opportunity, but I remain absolutely convinced it has no place in a long-term investor's portfolio," Money Morning Chief Investment Strategist Keith Fitz-Gerald said. "Where's Eastern Airlines today? Where's Palm Inc.? Research in Motion (Nasdaq: BBRY)? AOL Inc. (NYSE: AOL)? Myspace?"
While some investors get lured into this Facebook exuberance, here's why Fitz-Gerald warns against it.
Sure, Facebook Earnings Weren't Bad…
FB stock opinion aside, there's no question this was the best Facebook earnings report since the company went public.
The social media giant posted earnings of $0.19 a share, a nickel better than forecasts, and up from $0.12 a year earlier. Revenue climbed to $1.81 billion, also beating projections of $1.62 billion, and up 53% from $1.18 billion a year ago.
The big question on everyone's minds was how the Menlo Park, CA-based company tackled mobile. Facebook was late to the mobile arena and has been playing catch-up since. It finally appears as though it's making headway.
Mobile advertising revenue accounted for roughly 41% of Facebook's $1.60 billion in total advertising revenue in Q2, up from 30% in the first quarter.
"They've taken three or four quarters to try to fix the mobile issue," RBC Capital Markets analyst Mark Mahaney told CNBC. "They've gone from zero of their revenue being mobile to almost 50% now. That's pretty good evidence that they've fixed the mobile issue."
The mobile monthly active user tally at the end of the quarter was 819 million, up 51% year-over-year. Daily active mobile users averaged 469 million in June.
The overall daily active user count grew at a more modest pace, up 27% to 699 million on average for June, while monthly active users averaged 1.15 billion at the end of Q2.
The efforts stemmed from some deliberate Facebook moves to morph the company into a truly mobile-focused operation.
"The investments we have made over the past year are really paying off to position the company to thrive in a mobile world," David Ebersman, Facebook CFO, told CNBC.
But, Investing in FB Stock Still Isn't Good…
We here at Money Morning give Facebook CEO Mark Zuckerberg the proverbial "pat on the back," but we still don't think these shares are a good "Buy."
"From the headline hype this morning, you'd think that Moses had parted the Red Sea again, and that Zuckerberg was ready to walk on water," said Fitz-Gerald. "But I think if you look behind the numbers, a couple things are really apparent, things long-term investors can't ignore."