The Facebook IPO was one of the biggest debacles in Wall Street history. As the stock languished below its IPO price month after month, most investors gave up on it. They shouldn't have. Now Facebook is on a roll, and the catalyst driving it is just getting started…
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- Why the Facebook Stock Price Has Doubled in Two Months
- If this Works, Facebook Stock Could be the "Buy of the Decade"
- What is Facebook Home – And Will it Do Anything for Facebook Stock?
- Facebook IPO Deal Leaves Wall Street Seeing Red
- Can Mobile Really Drive a Facebook Stock Rally?
- Facebook Stock Downgrades Keep Pouring In
- Facebook Stock Fails to Rally as Lockup Ends
- Facebook Stock Rises Despite These 852 Million Reasons to Fall
- Facebook Stock Hits New Low, So What Now for Mark Zuckerberg?
- Facebook Earnings Report Gives Investors Zero Reasons to Stick Around
- Will a Weak Facebook Earnings Report Open Doors for these Competitors?
- Three Reasons the Facebook Earnings Report Will Disappoint
Facebook stock is one of the most controversial stocks in existence today.
With one billion users, investors have been waiting to see if Facebook's business model can pay off, especially after its IPO tanked.
Today, Money Morning's own e-commerce director, Bret Holmes, is going to give you the inside scoop on Facebook stock. Not some theoretical financial analysis, but what the future looks like for Facebook, from a guy who understands e-commerce and can explain how Facebook stock could be the "buy of the decade" for investors.
The much anticipated announcement from Facebook today (Thursday) has left us investors with two questions.
The first, what is Facebook Home?
The second, is this finally the development that CEO Mark Zuckerberg needs to rally investors behind Facebook stock, and lift it back above its IPO price of $38?
The social-networking giant Thursday unveiled Facebook Home, a customized homescreen for Android smartphones. Facebook Home highlights all things Facebook - a dream come true for anyone who loves the social media tool.
The U.S. Securities and Exchange Commission on Monday approved Nasdaq's plan to pay $62 million in compensation to brokers for mishandling the Facebook IPO. The Nasdaq missteps during Facebook's (Nasdaq: FB) debut cost Wall Street a collective $500 million and firms have fought to recoup those losses.
The amount was cleared by the SEC after Nasdaq offered to pay more than is allowed under its existing bylaws. As a self-regulatory organization, the Nasdaq enjoys certain legal protections which could have resulted in a significantly smaller settlement.
One of the reasons Facebook stock (Nasdaq: FB) hasn't fared better since it started trading - it's off 25% from its $38 IPO price - is the company's failure to profit from increased mobile activity among users.
But now, less than a year after Facebook's acknowledgement that it needed to monetize its growing mobile member usage, the company bills itself as a truly mobile company.
They say third time's the charm, but no such luck for Facebook stock, which fell even though the company's third earnings report since going public beat expectations.
The numbers failed to charm Facebook Inc. (Nasdaq: FB) investors who expected the report would offer more to like, and analysis who found plenty of concern in the expenses.
The social networking giant posted earnings per share of 17 cents, better than the consensus of 15 cents. Revenue came in at $1.59 billion, up 40% year over year, and ahead of forecasts for $1.53 billion. However, fourth quarter profit slumped 79%, dragged down by higher costs.
It marked the fourth time a torrent of the social networking giant's shares were let loose for trading since the company's hugely hyped initial public offering (IPO) on May 18 at $38 a share.
The reaction to the sizable release of shares has been mixed.
That's why, for the third time in nearly as many months, Facebook Inc. (Nasdaq: FB) on Wednesday braced for what could have been the largest selling spree yet to hit the social networking giant.
Scores of early investors and employees were at liberty to sell 778 million shares. Another 31 million in restricted stock, awarded to employees who joined the Menlo Park, CA-based company prior to 2011, were also unbound, along with 48 million shares held by former employees.
The staggering number is almost equal to Facebook's existing 921 million share float, according to data from the company's most current filing with the U.S. Securities and Exchange Commission.
But, a strange thing happened.
Now, chatter is swirling that CEO Mark Zuckerberg should step down and let a more experienced executive take the helm.
"There is a growing sense that Mark Zuckerberg, talented though he may be, is in over his hoodies as CEO of a multibillion-dollar public company," Sam Hamadeh, head of research firm PrivCo, told the Los Angeles Times. "While in many cases a company founder can, and does, grow into the job, things are happening so quickly that there is precious little time here for Zuckerberg to do that."
Fueling the sentiment is Facebook's steady descent since its calamitous IPO. On Thursday, as the first lockup period ended, which allowed early investors and venture capitalists to unburden their portfolio of battered shares, the stock hit a fresh low.
Facebook's shares closed Thursday at $19.87, a far cry from its debut price and peak of $45 a share.
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.
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.
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.