Facebook Inc. (Nasdaq: FB) absolutely crushed on earnings for the third quarter last Tuesday.
Indeed, the social network leader posted earnings per share ($1.76) that were more than 20% higher than Wall Street's forecasts.
At first glance, the report seems like very good news for a company that has found itself the target of growing criticism about data intrusions and the misuse of its platform during elections.
And while I'm happy to see that earnings are on the upswing, they do nothing to convince me that Facebook is no longer a troubled firm.
I don't come to this conclusion lightly.
I have been a huge Facebook bull for the last five years. I staunchly defended the company when it came under criticism from the U.S. Senate last spring… and when it became the butt of jokes on late-night TV several years ago.
However, the company is now facing a host of challenges at a time when the stock has clearly entered bear territory.
With that in mind, I want to walk you through those challenges.
Plus, I'll show you whether I have Facebook listed as a buy, sell, or hold.
Check it out…
Facebook's Baggage Buildup
Just hours before the Facebook earnings report, I appeared as a guest on Cavuto: Coast to Coast on Fox Business.
I told interviewer Connell McShane my concern went beyond a single quarter. Then I predicted the company would offer mixed results.
And that's exactly how things played out – Facebook beat on earnings and slightly missed on sales.
I'm not worried that the 33% sales increase was below forecasts and the weakest in four years. At some point, the firm's amazing growth over the last several years has to level off.
It all boils down to this: The company is clearly at a turning point, and CEO Mark Zuckerberg has not yet articulated a clear vision of what he's doing to get the company firing on all cylinders again.
Bear in mind, I have gone out on a limb twice before to offer a spirited defense of Zuckerberg, a leader who truly has transformed the way friends and family keep in touch and how companies reach new customers.
Urgent: This catastrophe could bring the U.S. economy to its knees – and make the Great Recession seem like a day at the beach. Read more…
The first time occurred back in March 2014. At the time, Zuckerberg had become a laughingstock on late-night TV after paying $19 billion for WhatsApp. The 5-year-old startup, at the time, had just $20 million in sales and a mere 55 employees.
And when we talked about Facebook in May, I applauded Zuckerberg and re-recommended the stock. The CEO had just done a great job of defending Facebook during two days of hearings on Capitol Hill.
Zuckerberg found himself in hot water because Facebook had sold user data to Cambridge Analytica, a British firm that accessed information on up to 87 million users of the social media network without their consent.
In turn, Cambridge supplied information that Donald Trump's presidential campaign relied on for targeted marketing during the 2016 election.
Zuckerberg "managed to run rings around some of the nation's more powerful politicians – but still come across as humble and polite," I observed. "For the most part, he also was forthright in his answers."
Here's the thing: Cambridge Analytica was not Facebook's only recent scandal involving user data and privacy.
And it won't be the last…
Facebook's Privacy Problems
About the Author
Michael A. Robinson is one of the top financial analysts working today. His book "Overdrawn: The Bailout of American Savings" was a prescient look at the anatomy of the nation's S&L crisis, long before the word "bailout" became part of our daily lexicon. He's a Pulitzer Prize-nominated writer and reporter, lauded by the Columbia Journalism Review for his aggressive style. His 30-year track record as a leading tech analyst has garnered him rave reviews, too. Today he is the editor of the monthly tech investing newsletter Nova-X Report as well as Radical Technology Profits, where he covers truly radical technologies – ones that have the power to sweep across the globe and change the very fabric of our lives – and profit opportunities they give rise to. He also explores "what's next" in the tech investing world at Strategic Tech Investor.