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Wednesday's "Earnings Beat" Makes This The Perfect "Bad-Market" Tech Stock

In last week’s Private Briefing report Our Experts Show You the Stocks to Pick in a ‘Stock-Picker’s Market’,” Money Map Press Chief Investment Strategist Keith Fitz-Gerald identified SanDisk Corp.(NasdaqGS: SNDK) as one of three stocks to buy in the face of the stock market sell-off.

And now we see why…

  • Featured Story

    You Might be Invested in Facebook Stock and Not Even Know it

    Investors who boast that they were smart enough to avoid the hype of investing in Facebook (Nasdaq: FB) stock might want to check their mutual funds' holdings before relishing in their bravado.

    According to data compiled by investment research firm Morningstar for The Wall Street Journal, some 160 U.S.-based mutual and exchange-traded funds bought shares of Facebook in May. And since only some fund companies choose to reveal their holdings on a monthly basis, the ones that chose to invest in Facebook will be disclosed over the next two months as fund companies file quarterly reports.

    "Even if John Q. Public didn't buy [Facebook] directly, he may own one of the hundreds of mutual funds that did," Geoff Bobroff, a mutual fund consultant in East Greenwich, RI, told The Journal.

    What is notable in many cases about the purchases, including those by lead underwriter Morgan Stanley (NYSE: MS), is that some of the funds that purchased shares wouldn't normally invest in a high-growth technology company like Facebook. And some wouldn't invest such a high percentage, like Morgan Stanley that had at least seven funds with over 5% of portfolio holdings in Facebook stock.

    "That's a huge gamble," Michael Kalscheur, a financial planner with Castle Wealth Advisors LLC, told The Journal. "Are you really going to put an IPO as a top-five holding in a fund?"

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  • How Much Is Facebook Stock

  • Facebook Stock Price Gets Small Bump in Lackluster Debut 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? 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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  • Buy, Sell or Hold: When to Buy Shares of Facebook 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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  • NYSE: FB vs. Nasdaq: FB, And the Other Big Facebook IPO Questions Investors were on high alert today (Wednesday) for a Facebook IPO, which has rumored to reserve both NYSE: FB and Nasdaq: FB as possible ticker symbols.

    A New York Post article reported the two listing companies were in "hot debate" for Facebook.

    "Facebook won't significantly change the listing revenues for these companies but there could be a real halo effect wherein other companies decided to list with whichever wins Facebook," Larry Tabb, founder of capital markets advisory firm Tabb Group, told The Post.

    Besides the ticker, the biggest questions on investors' minds include:

    How much does Facebook want to raise? The latest rumors say the filing will set a preliminary goal of $5 billion, which can be raised if enough investor interest is shown.

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  • Facebook IPO: Where's the Love, Mark Zuckerberg? The long-awaited Facebook IPO is finally arriving - and it's time for Mark Zuckerberg to share the love.

    But most of Facebook's 800 million users won't get a chance to grab a piece of the multibillion-dollar deal.

    Instead, the shares will be reserved for the wealthiest investors, not the loyal users who have fueled Zuckerberg's rise to riches.

    Before Facebook, Zuckererg was just a college student....

    Today, Zuckerberg's net worth is $17.5 billion and he's ranked No. 52 on the Forbes list of billionaires - No. 22 in the United States - and No. 9 on the Forbes list of powerful people.

    "Zuckerberg made history with Facebook - and now he's the king of social media and social networking - the man with the Midas touch," said Money Morning Capital Waves Strategist Shah Gilani. "But now it's time for him to give some of the gold that he's earned as the head of Facebook back to the people who helped make that happen. They're the ones who have brought his company to the forefront. They're the ones who should be participating in this."

    So, how could Zuckerberg use the Facebook IPO to give back to those who've helped him become an Internet legend?

    Gilani has a plan for that...

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  • Zynga IPO Flop Proves Social Media Listings Are Still Suspect
    A strong debut by Zynga Inc. (Nasdaq: ZNGA) today (Friday) could have redeemed the tarnished reputation of social media companies. Instead, the online game-maker became the latest addition to salvage yard full of over-hyped social media companies that didn't live up to the promise of their initial listings.

    After debuting at $10 a share, Zynga stock tumbled 7.75% to $9.25 in just four short hours of trading.

    Money Morning Capital Waves Strategist Shah Gilani wasn't surprised.

    "I don't particularly like the position the company's in. It's got a lot of competition at its heels and I'm not sure about the valuation of the stock," he said on Fox Business' "Varney & Co." program this morning. "I think there's a lot of hype in the social media space."

    Indeed, Zynga's failure follows in the footsteps of Pandora Media Inc. (NYSE: P), LinkedIn Corp. (NYSE: LNKD), and Groupon Inc. (Nasdaq: GRPN).

    But that's not all.

    Here's what Zynga's initial public offering (IPO) means to investors going forward:

    • Zynga will set the tone for 2012: The tech IPO market this year has fizzled, and was in desperate need of a spark that Zynga didn't provide. This is an undesirable lead-in for Facebook Inc., which is expected to debut in the second quarter of 2012. It might also hurt Yelp! Inc., the business review site that filed for an IPO on Nov. 17.
    • It could influence future tech-IPO overpricing: Zynga drastically scaled back its initial pricing by more than 50% since July, when it was valued at $20 billion. Tech IPOs priced earlier in the year received a barrage of criticism for overpricing, but there's been much less of the same talk surrounding Zynga's range of $8.50 to $10. If it fails to close above $10 a share today, future tech IPOs may rethink their strategies.
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  • A Tech IPO Bellwether: What to Watch as Zynga Stock Starts Trading Social-gaming giant Zynga Inc. starts trading today (Friday), capping off a rocky year for tech initial public offerings (IPOs). A strong performance from Zynga stock today and into the New Year would shed the "bubble" reputation surrounding the sector in 2011.

    Here's what you need to know about this latest tech IPO:

    • Zynga will set the tone for 2012: The tech IPO market this year has fizzled, and could use a spark. Zynga could provide one. Scott Sweet of IPO Boutique told clients in an e-mail Wednesday morning there was more investor interest in Zynga than available shares. A strong debut for Zynga stock would be a good lead-in for Facebook Inc., which is expected to debut in the second quarter of 2012. It might also help Yelp! Inc., the business review site that filed for an IPO on Nov. 17. Finally, it might even subdue talk that tech is doomed for a second dot-com bubble.
    • It's Facebook-dependent: Zynga's growth is tied directly to Facebook. It generates a whopping 95% of its revenue through the social networking site, and that's not going to change anytime soon. While the relationship is an incredible revenue boost for Zynga, it's also a huge investor concern. If the business relationship soured, Zynga's revenue stream would dry up immediately.

      Still, this dependence could give Zynga stock a boost, in that investors eager to profit from Facebook's growth can do so with the social gamer.

      Zynga's contract with Facebook isn't up for review until 2015, giving Zynga three years to develop new revenue sources and decrease its Facebook dependence - if it proves detrimental. The company plans to push its product toward high-growth Asian markets.
    • It could mark the end of drastic tech-IPO overpricing: Zynga has drastically scaled back its initial pricing by more than 50% since July, when it was valued at $20 billion. Tech IPOs priced earlier in the year received a barrage of criticism for overpricing, but there's been much less of the same talk surrounding Zynga's adjusted range.

      BTIG analyst Richard Greenfield recommended participating in the IPO in the $8.50 to $10 range, and said even at the higher end he thinks it could yield up to a 50% return for investors within a year. Greenfield said the lower IPO price range favors investors and expects the company's revenue to grow by about 45% over the next two years.
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  • Facebook & Goldman Sachs: Don't Be Fooled by a Facebook IPO If you missed Google, should you bet on Facebook? We don't think so.

    Facebook will IPO. And it will IPO soon. The company may have no choice if the SEC gets a hold of its records. But that doesn't mean it will be a good stock to buy.

    Facebook is the most visited Web site in the world. Its founder just had a successful movie made from his life. And rumors about the company's IPO potential have investors and their financial advisors drooling.

    Yes, Facebook is popular. But none of those things means the company can make any money. And Goldman's nearly half-a-billion dollar investment in the social network isn't the... Read More...