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Facebook Earnings Report Gives Investors Zero Reasons to Stick Around

By , Money Morning -

The first Facebook earnings report since the company went public was released today (Thursday), and the numbers came in right in line with lowered, underwhelming expectations.

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.

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Why the Facebook Stock Price is Up

By , Contributing Writer, Money Morning -

Over the past several days, the Facebook stock price has done a stark about-face.

In fact, Facebook (Nasdaq: FB) shareholders just might get the pop in price they have been hoping for ever since the social media giant debuted May 18.

Worries that Facebook's shares were overvalued and concerns that the company would not be able to grow revenue fast enough had pummeled shares lower by as much as 32% from the May 18 IPO price of $38.

After a disastrous IPO and a dismal showing in the weeks that followed, shares of Facebook are finally showing real signs of life. The tide may be turning.



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Will the Facebook Stock Price Overcome This Latest Concern?

By , Money Morning -

Facebook (Nasdaq: FB) and its struggling stock price have been in the spotlight since the company's IPO, but rarely for good news. This week started no differently.

Besides its poor stock performance, Facebook already has been blamed for halting this year's IPO market. There hasn't been an IPO since Facebook debuted on May 17.

Facebook also is taking heat for wreaking havoc on Nasdaq's reputation after technical glitches marred Facebook's debut. Nasdaq revealed last week that it will pay out $40 million in compensation damages to brokerages that lost money during the IPO fiasco.

Finally, many investors claim they were misinformed on Facebook stock's first-day potential, and have initiated a class action lawsuit against the underwriters.

Now the most recent bad news has cast even more doubts over whether or not Facebook can perform as well as investors expected.

Has Facebook's Growth Reached a Ceiling?

Over the weekend The Wall Street Journal ran a report on Facebook's growth slowdown, especially in the United States.

Citing market research firm comScore Inc. (Nasdaq: SCOR), the report indicated unique visitors to the Facebook Website in the United States increased just 5% in April from a year earlier.

That was the lowest U.S. user growth rate since comScore started tracking the data in 2008. It compared very poorly to the data from the past two years, down from 24% growth in April 2011 and 89% in April 2010.

The amount of time Facebook users spend per month on the site increased, but also at a slower rate than before. Facebook users' time-on-site was up 16% from a year earlier, compared to a 23% increase in 2011 and 57% in 2010, according to comScore.

"The assumption that Facebook can maintain the 100% growth it reported Q2 2011 is no more plausible than the 45% growth it reported [earlier this year," said Money Morning Chief Investment Strategist Keith Fitz-Gerald after the stock started trading in May. "Google couldn't. Apple couldn't. And both of them are real businesses."

It may be a matter of numbers limiting Facebook's growth rather than a changed perception or heightened dislike of the company. Facebook is estimated to have already captured 71% of the 221 million U.S. Internet users, leaving little room for U.S. growth.

That is troubling as the U.S. accounts for approximately 56% of Facebook's 2011 ad revenue of $3.1 billion, according to the company's regulatory filings.

Morningstar analyst Rick Summer stated that Facebook cannot expect to have the same post-IPO growth as Google Inc. (Nasdaq: GOOG), due to the fact that Facebook already has a dominant market share of its industry and a very high number of Internet users.

Summer suggested that increased ad pricing could drive future growth.

"Facebook is already a dominant Web platform and they've got significant Internet penetration today," said Summer. "Ad pricing is clearly going to be where their growth is going to come from."

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Facebook Stock Price Gets Small Bump in Lackluster Debut

By , Money Morning -

In what was one of the most highly anticipated initial public offerings in history, Facebook (Nasdaq: FB) finally made its debut among much fanfare and frenzy Friday.

But the Facebook stock price failed to soar as high as the hype. While not exactly a dud, the intro was definitely subdued.

Shares opened around 11:30 a.m. in New York at $42.05, up about 11% from Facebook's IPO price. Momentum quickly ebbed, and shares dropped as low at the $38 IPO price in the first half hour of trading.

By 3 p.m. shares were hovering just above $38. But with an hour of trading still to go, investors shouldn't get complacent.

"The day isn't over," cautioned Money Morning Chief Investment Strategist Keith Fitz-Gerald. But regarding Facebook's debut, "initial trading has not been impressive."

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Facebook Stock Ready to Roll – But Where Will it Go?

By , Associate Editor, Money Morning -

The Facebook IPO price was set and the stock is ready to start trading - but will it live up to its hype or sharply sell-off?

The social media giant priced at $38 a share, the company announced after market close yesterday (Thursday).

That makes Facebook the largest tech IPO in history, valued at $16 billion.

It's the third largest U.S. IPO ever, behind first place Visa at $19.7 billion and then General Motors, which raised $18.1 billion.

While the stock has created unrivaled investor frenzy, there is a wide range of predictions for how Facebook will do in its first trading day - and who the real winners will be.

"The ones who make out on IPOs are the early investors, venture capitalists, founders, and underwriters," said Money Morning Chief Investment Strategist Keith Fitz-Gerald. "The public almost always goes along for the ride...whether or not they get taken for a ride remains to be seen." The Facebook stock price will be determined when it starts trading today at 11 a.m.

Where the cutoff is for considering the IPO a success varies - with many thinking anything below 50% would be a disappointment.

"I think anything over 50 percent will be considered a successful offering - anything under that would be underwhelming, Jim Krapfel, an analyst at Morningstar, told Reuters. "A lot of retail investors are not concerned about valuation. That's what is going to drive the first day pop."

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Facebook IPO Size Hits 421 Million Shares

By , Contributing Writer, Money Morning -

As it approaches, the Facebook IPO just got bigger as more early investors look to cash out.

Just after the Facebook IPO price range got a boost, Facebook investors raised the number of shares they are selling in the social network giant's initial public offering. While the company isn't selling any more, individual investors like Accel Partners, Goldman Sachs Group Inc. (NYSE: GS) and others will sell an additional 83.8 million shares.

That brings that total number of shares to be sold to 421.2 million, according to a new regulatory filing, and lifts the sale to as much as $16 billion.

While the news was welcomed by ordinary investors clamoring for shares as Facebook debuts, it's curious why more and more insiders are racing to sell part of their stake. The move may just be a signal of the IPO's astronomical demand - but could make some investors wary.

"If the demand wasn't there, they wouldn't have upsized the deal," Greenwood Capital's Walter Todd told Bloomberg News. "On the other hand, when you see insiders unloading their stakes, you start to wonder why. I could see it turning some institutional investors off."

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Buy, Sell or Hold: When to Buy Shares of Facebook

By , Global Macro Trends Specialist, Money Morning -

You might have heard....

Facebook Inc. (NYSE: FB) is the most awaited initial public offering (IPO) since Google Inc. (Nasdaq: GOOG).

The recent registration of the company's IPO documents means it won't be long until Facebook shares begin trading freely.

But will Facebook shares make you rich beyond your wildest dreams like mural painter David Choe?

Or would you be better off watching from the sidelines before you buy shares of the social media giant?

The Details behind the Facebook IPO

Here's what I've learned from Facebook's S-1.

Some of the data points buried in the IPO document are eye-opening, to say the least.

Chief among those are Facebook's assertion that 6% to 7% of the entire world population logs in every day. More importantly, they stay logged in for a significant amount of time.

However, what will happen in the future to drive the stock's share price after it's brought to market is buried deeper in the details.

It's these details that make Facebook's IPO a hold if you already own shares, but also a "wait to buy" if you are like most people and want to own them.

In a nutshell, what I've learned is the banks are bringing Facebook to market fully priced.

My opinion is the bankers have gotten greedy and decided to push the valuation numbers above the levels that I believe are sustainable.

The company is being valued at $75 billion - $100 billion dollars at launch. This would make it one of the most valuable companies in the world, yet its actual revenue, let alone profitability, is at a more mundane level.

Currently, Facebook is reporting about $4 billion in revenue and profits of $1 billion.

That means if Facebook prices in at the top of its estimated range ($100 billion), based on current disclosures it would have a 100-to-1 price to earnings (P/E) ratio.

In other words, it's only going to take about 100 years for Facebook to eventually earn what it may price at. Compared to other blockbuster stocks, that's quite rich.

By comparison, Apple Inc. (Nasdaq: AAPL) has $100 billion in cash and a P/E ratio of 11 while Google's P/E is 20.

That's why it's time to "Hold" Facebook (**) or wait to buy it until insiders get a chance to sell their shares and bring the price down to levels common people can realistically afford to purchase.



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Before You Get Excited About the Facebook IPO…

By , Associate Editor, Money Morning -

For more than a year there has been rampant speculation about a Facebook IPO, and now it finally appears as though one is on the way.

The social media giant could file papers for an initial public offering as soon as Wednesday, according to a report from The Wall Street Journal. The company is looking at a deal that would value the social media giant between $75 billion and $100 billion, the WSJ reported, making it one of the biggest in U.S. history.

Scott Sweet of IPO Boutique told MarketWatch a Facebook IPO will likely lead to "pandemonium."

"It's absolutely massive," Sweet said in an interview. "The mere drop of a hint will cause pandemonium."

Facebook is looking to raise as much as $10 billion, which would make it the fourth-largest U.S. IPO behind Visa Inc. (NYSE: V), General Motors Co. (NYSE: GM), and AT&T Wireless. A $100 billion valuation would make Facebook worth as much as global powerhouse McDonald's Corp. (NYSE: MCD).

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