Best of the Week
Most Popular
1.Gold Price Trend Forecast, Where are the Gold Traders? - Bob_Loukas
2.Stocks Bear Market of 2017 Begins? Shorting the Dow At its Peak! - Nadeem_Walayat
3.Betting on President Trump Leaving Office Early, Presidency End Date - Betfair Market - Nadeem_Walayat
4.Why Stock Market Analysts Will be Wrong About 2017 - Clif_Droke
5.Is This The Best Way For Investors To Play The Electric Car Boom - OilPrice_Com
6.Silver Price 2017 Trend Forecast Update - Video - Nadeem_Walayat
7.Gold Price Set For Very Bullish 2017, Trend Forecast - Austin_Galt
8.10 Things I learned From Meetings With Trump’s Transition Team - - John_Mauldin
9.How Investors Can Profit From Trumps Military Ambitions - OilPrice_Com
10.Channel 4 War on 'Fake News', Forgets Own Alt Reality Propaganda Broadcasting - Nadeem_Walayat
Last 7 days
Underperformance in Gold Stocks Argues for Interim Peak - 25th Feb 17
Watch What Happens When Silver Price Hits $26...  - 25th Feb 17
Gold Futures Buying Yet to Start - 25th Feb 17
When the Stock Market Flying Pig Tops - 24th Feb 17
Gold, Second Fed Hike and Interest Rates - 24th Feb 17
Bitcoin Price Hits Record High! - 24th Feb 17
Another Stock Market Bubble? Bring it On! - 24th Feb 17
What Investors Need To Know About U.S. Money Market Funds? - 24th Feb 17
When Was America’s Peak Wealth? - 24th Feb 17
The Oscars – Worth Their Weight in Gold? - 24th Feb 17
The Best Reasons to Buy Gold in the Age of Trump - 22nd Feb 17
Silver, The Return of Stagflation - 22nd Feb 17
Why EU BrExit Single Market Access Hard line is European Union Committing Suicide - 22nd Feb 17
Gold: Short End US Rates Matter More Than Long End Real Yields - 22nd Feb 17
CONTINENTAL RESOURCES: Example Of What Is Horribly Wrong With The U.S. Shale Oil Industry - 22nd Feb 17
Here’s Proof Rising Rates Are Good for Gold - 21st Feb 17
Gold and Silver Weekly Update - 21st Feb 17
US Dollar and Gold Battle of the Cycles - 21st Feb 17
NSA and CIA is the Enemy of the People - 21st Feb 17
Big Moves in the World Stock Markets - Big Bases - 21st Feb 17
Stock Market Uptrend Continues - 21st Feb 17
Brent Crude Oil Price Technical Update: Low Volatility Leads to High Volatility - 20th Feb 17
Trump’s Tax System Could Spark The Wave Of Self-Employment - 20th Feb 17
Here’s How to Stay Ahead of Machines and AI - 20th Feb 17
Warning Signs Of Instability In Russia - 20th Feb 17
Warning: This Energy Investment Could Wreak Havoc On Your Portfolio - 20th Feb 17
The Mother of All Financial Bubbles will be Unimaginably Destructive when it Bursts - 19th Feb 17
Gold’s Fundamentals Strengthen - 18th Feb 17
The Flynn Fiascom, the Trump Revolution Ends in a Whimper - 18th Feb 17
Not Nearly Enough Economic Growth To Keep Growing - 18th Feb 17
SPX Stocks Bull Market Continues to make New Highs - 18th Feb 17
China Disaster to Trigger Gold Run, Trump to Appoint 5 of 7 Fed Governors - 18th Feb 17
Gold Stock Volume Divergence - 17th Feb 17
Gold, Silver, US Dollar Cycles - 17th Feb 17
Inflation Spikes in 2017, Supporting Gold Prices Despite Increased Odds of March Rate Hike - 17th Feb 17
Roses Are Red... and So's Been EURUSD's Trend - 17th Feb 17
Gold Trade Note Sighted - 17th Feb 17
Gold Is Undervalued Say Leading Fund Managers - 17th Feb 17
NSA, CIA, FBI, Media Establishment 'Deep State' War Against Emerging 'Trump State' - 16th Feb 17
Silver, Gold Stocks and Remembering the Genius of Hunter S. Thompson - 16th Feb 17
Maps That Show The US’ Strategy In Asia-Pacific - 15th Feb 17
The Trump Stock Market Rally Is Just Getting Started! - 15th Feb 17
Tesco Crisis - Fake Prices, Brexit Inflation Tsunami to Send Food Prices Soaring 10% 2017 - 15th Feb 17
Stock Market Indexes Appear Ready to Roll Over - 15th Feb 17
Gold Bull Market? Or was 2016 Just a Gold Bug Mirage? - 15th Feb 17
Here’s How Germany Buys Time From China - 15th Feb 17
The Stock Trader’s Actionable Guide to Trump - 15th Feb 17
Trump A New Jacksonian Era? The Fourth Turning (2) - 14th Feb 17
Stock Market Yet Another Wall Street 'Witch's Brew' - 14th Feb 17
This Is Why You Don’t Own A Lot Of Stocks - 14th Feb 17
Proposed Tax Reforms Face Enormous Headwinds - 14th Feb 17

Market Oracle FREE Newsletter

State of Global Markets 2017 - Report

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

© 2005-2016 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

Catching a Falling Financial Knife