Join        Login             Stock Quote

Facebook: It Is High Time To Move Sideways

 February 01, 2013 09:52 AM

(By Mani) It is high time for Facebook. Inc. (NASDAQ: FB) investors to move into sidelines as the slower-than-expected ramp of Gifts and in-line mobile advertising results put a big question mark on the social networking giant's future.

Meanwhile, the company guided to 50 percent expense growth in 2013, with revenue growing at a slower pace.

So, the writing is on the wall. For the stock to go higher, new catalysts must emerge.

Wall Street had been looking to Gifts scheme for help, but the company has tapped-down expectations. In the fourth-quarter of 2012, Facebook introduced Gifts, which allows users to purchase gifts for their friends directly on Facebook's website through retail partners.

[Related -Why Investing In IPOs Is A Foolish Move]

In addition, the Street is too focused on mobile data points as Facebook becomes a much more dynamic platform for marketers. One of the biggest risks to the Facebook story is right-rail revenue decelerating faster than expected from newsfeed cannibalization. If this is the case, there could be downside to ad revenue estimates.

"Contrary to consensus, we do not think 2013 stock performance will be dictated by "mobile monetization"; rather, we think that has driven the stock's move over the past two to three months and in-line mobile results this quarter suggest that catalyst is complete (for now)," BMO Capital Markets analyst Daniel Salmon said in a note to clients.

The key for 2013's stock performance is not going to be mobile usage or ad load, but rather how well Facebook can continue to adapt and execute for marketers across their customer relationship management, earned/owned, online video, native advertising, and search efforts, as well as mobile.

[Related -Facebook Inc. (FB) Q2 Earnings Preview: Scoring Big on the World Cup]

For example, Super Bowl efforts this month will be about engagement with contests/promotions across all screens leading up to the game, while second screen engagement on the day off will happen on both tablets and laptops.

"Beyond a pullback in the stock, we would look to get more proactive again if (1) we get more details about video ad products that were hinted at on the conference call; (2) expectations for Gifts improve due to faster country rollout or product improvement, like wedding registries, or (3) Instagram monetization begins ramping up," Salmon added.

Menlo Park, California-based Facebook is the largest social media property in the world with $1 billion users. Marketers can access Facebook's more than 1 billion members and host unpaid brand pages and buy targeted social advertising.

Advertisers pay for ads displayed on Facebook based on a per-impression (CPM) and per-click (CPC) basis. Ad formats include Sponsored Stories, Promoted Posts and Sponsored (search) Listings while tools like Custom Audiences help targeting.

Facebook became public on May 18, 2012 at $38. Now, the shares are trading at $30 levels, and has been trading between $28.74 and $31.44 during the past 52-weeks.



Post Comment -- Login is required to post message
Alert for new comments:
Your email:
Your Website:

rss feed

Latest Stories

article imageHas Warren Buffett Found The Best Investment In Oil?

Shares of oil stocks plunged again as the price of West Texas Intermediate wiped out nearly half of its read on...

article imageDemand For Safe-Haven Bonds Surged Last Week

The crowd piled into investment-grade bonds last week as economic worries triggered an exodus out of risky read on...

article imageThoughts on MetLife and AIG

In some ways, this is a boring time in insurance investing.  A lot of companies seem cheap on a book and/or read on...

article imageA 2016 Recession Would Be Different

If the US or the Eurozone entered a recession this year, a few macroeconomic variables would look very read on...

Popular Articles

Daily Sector Scan
Partner Center

Fundamental data is provided by Zacks Investment Research, and Commentary, news and Press Releases provided by YellowBrix and Quotemedia.
All information provided "as is" for informational purposes only, not intended for trading purposes or advice. iStockAnalyst.com is not an investment adviser and does not provide, endorse or review any information or data contained herein.
The blog articles are opinions by respective blogger. By using this site you are agreeing to terms and conditions posted on respective bloggers' website.
The postings/comments on the site may or may not be from reliable sources. Neither iStockAnalyst nor any of its independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. You are solely responsible for the investment decisions made by you and the consequences resulting therefrom. By accessing the iStockAnalyst.com site, you agree not to redistribute the information found therein.
The sector scan is based on 15-30 minutes delayed data. The Pattern scan is based on EOD data.