Best of the Week
Most Popular
1.Is the Stocks Bull Market Over? Dow Trend Forecast into End January 2015 - Nadeem_Walayat
2.Gold and Silver Stocks Apocalypse Now, Bear Market Review - Rambus_Chartology
3.NHS Baldrick Plan to Spread Ebola Across UK - Sheffield, Newcastle, Liverpool, London Hospitals - Nadeem_Walayat
4.Ebola Terror Threat Suicide Bio-Weapons Threatens Multiple 9/11's, Global Plague - Nadeem_Walayat
5.Second-Richest Man Says Mortgages Now a "No Brainer" - Dr. Steve Sjuggerud
6.Gold And Silver Still No End In Sight - Michael_Noonan
7.NHS Baldrick Plan to Spread Ebola Across UK - Sheffield, Newcastle, Liverpool, London Hospitals - Nadeem_Walayat
8.The Gold Bug is Set to Bite Back - EWI
9.How Alibaba Could Capitalize on the EBay-PayPal Split - Frank_Holmes
10.The Consequences of the Economic Peace - John_Mauldin
Last 5 days
Gold Price Rebounds but Gold Miners Struggle - 25th Oct 14
Stock Market Buy the Dip or Sell the Rally - 25th Oct 14
Get Ready for “Stupid Cheap” Stock Prices - 25th Oct 14
The Trend Every Nation on Earth Is Pouring Money Into - 25th Oct 14 - Keith Fitz-Gerald
Bitcoin Price Decline Stopped, Possibly Temporarily - 25th Oct 14
Bullish Silver Stealth Buying - 24th Oct 14
Blood in the Streets to Create the Gold Stocks Investor Opportunity of the Decade - 24th Oct 14
Swiss ‘Yes’ and ‘No’ Gold Initiative Campaigns Compete at Launches in Bern - 24th Oct 14
War And The Law Of Unintended Consequences - 24th Oct 14
Tesco Meltdown Debt Default Risk Could Trigger a Financial Crisis in Early 2015 - 24th Oct 14
Saudi Move to Cut Oil Prices Is Now Russia's Biggest Economic Threat - 24th Oct 14
US Stock Market Top Is Now In Sight - 24th Oct 14
New Profit Points in the Shifting Balance of Power, Welcome to Saudi America - 24th Oct 14
QE Failure & Folly Of Paper Mache, Treasury Bond Integrated Lifeline Patches - 24th Oct 14
U.S. Economy Faltering Momentum, Debt and Asset Bubbles - 23rd Oct 14
Annuities - Afraid Your Money Will Vanish before You Do? - 23rd Oct 14
What Debt Deleveraging? - 23rd Oct 14
How to Profit from Massive Spin-Offs with Just One Play - 23rd Oct 14
Evaluating Ebola as a Biological Weapon - 23rd Oct 14
Euro, USD, Gold and Stocks According to Chartology - 23rd Oct 14
Why You Should Always Be Invested in the Stock Market (Even Now) - 23rd Oct 14
Five U.S. Housing Market Warning Signs Point to Real Estate Market Downturn - 23rd Oct 14
The Better Short: Gold or Silver? - 23rd Oct 14
Focus on Graphite Companies with Green Energy and Technology Strategies - 22nd Oct 14
Crude Oil Price Hitting Bottom - 22nd Oct 14
Evidence of Another Even More Sweeping U.S. Housing Market Bust Already Starting to Appear - 22nd Oct 14
Gold Or Crushing Paper Debt Stocks Crash? - 22nd Oct 14
India Gold Demand Surges 450% and Bank of Russia Demand At 15 Year High - 22nd Oct 14
Bitcoin Stock Exchange Could Be "More Valuable than Alibaba" - 22nd Oct 14
Currency War - How to Profit from a Stronger U.S. Dollar - 22nd Oct 14
Banks Hold Treasuries and Make Loans- 22nd Oct 14
Gold and Silver Timing is Everything - 22nd Oct 14
Don't Get Ruined by These 10 Popular Investment Myths (Part VII) - 22nd Oct 14
Follow the Baby Boom to Biotech Stock Profits - 22nd Oct 14
Copper, Nickel and Zinc Won't Be Cheap for Long - 22nd Oct 14
How Will We Know That the Gold & Silver Price Bottom Is In? - 21st Oct 14
Is Gold as Dead as Florida Hurricanes? - 21st Oct 14
First Swiss Gold Poll Shows Pro-Gold Side In Lead At 45% - 21st Oct 14
The Similarities Between Germany and China - 21st Oct 14
The REAL Reason Why the Stock Market Turned Down - 21st Oct 14
Petrobras is a 'Scheme, Not a Stock' - 21st Oct 14
Stocks Bear Market Indicator Is Off the Mark - 20th Oct 14
Stock Market Ideal Turning Point is at Hand - 20th Oct 14
Investors Quit Complaining, The Environment is Perfect Right Now - 20th Oct 14
Ebola Armageddon Could Trigger a Rebirth in Gold and Silver Prices - 20th Oct 14
Gold vs Euro Risk Due To Possible Return of Italian Lira - Drachmas, Escudos, Pesetas and Punts? - 20th Oct 14
Stocks Rebounded Following Recent Sell-Off, But Will It Last? - 20th Oct 14
U.S. Responsible for West Africa Ebola Outbreak Says Liberian Scientist - 20th Oct 14
Stock Market Intermediate B Wave has Started - 20th Oct 14
Gold Stocks Analysis – FNV, CG, NCM, SBM - 19th Oct 14
Stock Market Primary IV Wave Counter Trend Rally - 19th Oct 14
Gold And Silver - Financial World: House Of Cards Built On Sand - 18th Oct 14
Anatomy of a Stock Market Sell-Off - 18th Oct 14
Why OPEC Has Declared an Oil War on Russia - 18th Oct 14
Gold and Silver Extreme Shorting Peaks - 18th Oct 14
Bitcoin Price Fall to $350? - 18th Oct 14
Tesco Supermarket Crisis Worse To Come as Customers Vanish! - 18th Oct 14

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

Stocks Epic Bear Market

Reasons Why Facebook Stock Price Could Crash After Earnings Report

Companies / Tech Stocks May 01, 2013 - 11:58 AM GMT

By: Money_Morning

Companies

Diane Alter writes: Facebook stock rose nearly 3% Tuesday to come within $11 of its IPO price - but a disappointing earnings report could send shares plunging if the social media giant doesn't show healthy improvement.

One of the biggest things to watch when Facebook Inc. (Nasdaq: FB) reports Q1 earnings after the close Wednesday will be how the company is managing the transition to mobile.


Fourth-quarter results showed improved mobile ad revenue and mobile user numbers from the previous quarter. While the trend is expected to continue, the social network behemoth will need to impress Wall Street if it wants investors to stick around.

Shares have stalled since hitting $33 in January, the highest price since the stock peaked shortly after the IPO. Year-to-date, shares are down roughly 20%, well below the 11% gain for the broad based Standard & Poor's 500 Index.

That kind of uninspiring showing amid record stock market rallies have left scores of investors with at least one foot out the door.

Investors are paying roughly $27 a share for a company that earned a paltry 2 cents a share over the last 12 months. That works out to a whopping price/earnings ratio of nearly 1,300.

Expectations for the Q1 earnings report are for a profit of 12 cents per share and revenue growth of 36% to $1.44 billion.

Even if Facebook posts better-than-expected results, the fate of Facebook stock is still fragile. Here's why.

Four Reasons Facebook Stock Could Plummet

■Mobile Ads Not Meaningful Enough
Mobile ads are key to Facebook's future growth. Early investors will recall concerns over mobile growth were responsible for the 40% price plunge FB shares experienced shortly after its debut.

Indeed, users who access the social network from smarthphones and tablets tend to be more active than those who log on from desktop devices. But, mobile ads generate much lower ad rates than those from PCs.

Fourth-quarter revenue from mobile ads accounted for 23% of Facebook's revenue, up from zero six months earlier, eMarketer reports. Facebook's mobile ad market is expected to grow 19% this year to $11.4 billion. Between 2013 and 2016, according to Gartner, mobile advertising will increase at a 29% annual rate to $24.6 billion.

In spite of that high growth rate, the mobile ad market is too small to have a meaningful impact on Facebook's $5.1 billion top line, Forbes notes.

Furthermore, Facebook's ambitious attempts to pry ad dollars away from Google Inc. (Nasdaq; GOOG) with the new HTC phone will be a struggle. The Internet giant is expected to take a hefty 53% of the mobile ad market this year, dwarfing Facebook's projected 13% share.

■Fleeing Facebook Users
Since amassing one billion plus users, chatter has swirled that Facebook members are spending less time on the site and leaving in droves.

Fickle teens have been defecting for rivals like Tumblr, Reddit, Whatsapp and Kik, taking with them crucial ad dollars. Huffington Post reports some six million U.S. members have fled since the billion user milestone was achieved.

As Facebook has "grown boring" and lost its "cool factor," those who have left are not likely to come back. A recent Piper Jaffray survey shows just 33% of teens presently consider Facebook "the most important social network," down from 42% from 2012.

■Higher Costs, Slower Growth
Facebook operating expenses are expected to spike in 2013. Additionally, 2014 EPS growth is expected to slow significantly to 27.6%.

Any earnings outlook that shows higher expenses amid lower earnings will give investors few reasons to stick around - especially with shares priced high.

Still down about 29% from when it began trading as a public company nearly a year ago, FB shares are no bargain. Forbes crunched the numbers and found the stock is still 76% overvalued.

■The Board Room Shuffle
As COO Sheryl Sandberg promotes her controversial best seller "Lean In," investors are left questioning just how time consuming her job at Facebook is, how much time she is putting in and her lofty compensation.

Last year, Sandberg was the highest paid Facebook executive pocketing $26.2 million in cash and stock.

What's more, venture capitalist Jim Breyer announced last week he is stepping down from Facebook's board. Breyer joined the board in 2005, the year he and his Accel Partners invested $12.7 million in the then-promising company. Breyer says he is stepping down to focus on his role at Harvard Corp., one of the governing bodies of Harvard University. His departure leaves a notable hole.

Watch for Facebook stock to react to Wednesday's earnings report after hours.

Source :http://moneymorning.com/2013/04/30/four-reasons-facebook-stock-could-tumble-after-earnings-report/

Money Morning/The Money Map Report

©2013 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email: customerservice@moneymorning.com

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investent advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Money Morning Archive

© 2005-2014 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Free Report - Financial Markets 2014