Market misreading some great earnings
Facebook and Starbucks are terrific companies. While their stocks may be expensive, they are better than just about everyone else at what they do.
Facebook delivered a monster quarter, but it seemed that all anyone could focus on was a comment about how younger teens have decreased usage and how the company does not expect to significantly increase ads as a percentage of news feeds. The result? We got a real dead-horse beating about the peaking of Facebook and, even though ad revenue grew 60 percent and mobile ads are now 49 percent of the business and the company generated $1.8 billion in ad sales, you left the call with a sense that Facebook's best times are behind it.
Of course that's fatuous logic in that revenues for video and Instagram haven't even hit yet and the company is just scratching the surface of the ad market. Given that digital media now represents a much bigger part of viewing than television, specifically 5.25 hours a day for Internet vs. 4.5 hours for TV and the fact that Facebook has one in eight minutes of that time of desktop and one in five minutes on mobile, that's a lot of time to monetize.
But the analysts saw it differently, contending, at least from the questions, that the company has a self-imposed limit of how much advertising it can offer without spoiling the user experience, with an undertone that younger teenagers must already be turned off by the ads.
The Q&A turned the biggest upside surprise of the season into a downer and it shouldn't have been. There's no slowing here that I can find, but I felt very lonely with that viewpoint after listening to the interplay.
The Starbucks call also had a denouement feel about it. There was a sense among the analysts that Starbucks can't possibly exceed what it's done already. At one point it got so difficult that Howard Schultz mentioned that the "tension between us and you regarding comparable growth guidance" had gotten out of hand and it would be irresponsible to say that Starbucks will beat the 8 percent comps in the Americas and 7 percent overall.
Lost in the shuffle were the fabulous packaged-goods initiatives, the Teavana rollout and the day-part expansion. Instead the mob wanted facts and figures about how the Boulange food rollout was impacting comparable-store sales and Starbucks management just wouldn't go there. It didn't seem to matter to the analysts one bit that Starbucks may actually be using its stores as launching pads for supermarket aisle takeaway and for lunch and dinner, a true monetization of bricks and mortar.
Frankly, I found the Q&A here of the total nit-pick variety, but I respect the fact that most of these analysts are trying to build models and they are flummoxed about how to interpret all of these initiatives within the confines of the spreadsheet, a common problem when it comes to this chain. How do you value loyalty? How do you put a price tag on affinity cards and mobile? They don't know how to do it, so the credit where credit should be isn't there. Instead, the focus is on kinks in new initiatives even though Howard took pains to point out that the Panera problem --slow throughput on hard-to-make specials -- and new products isn't an issue for Starbucks.
The commonality of both conference calls? Managements are trying to explain how good business is and analysts were crafting possible theses about how business reached its zenith and it is all downhill from here. Hence the tentative nature of after-hours trading.
To me, we're getting a chance to buy companies at the top of their games for less than we might otherwise because of these updates, making the stocks more of a value. That's necessary because of the heightened valuations and the run-ups into the quarters.
Bottom line: These companies are terrific, and while their stocks may be expensive, they are better than just about everyone else at what they do. To bail from best of breed this easily seems a little glib and a lot fatuous, and I'm just not going there.
Action Alerts PLUS, which Cramer co-manages as a charitable trust, is long FB.
More from TheStreet.com
ALL THIS FUSS OVER ADS NO ONE CLICKS ON?
note the typical facebook page loads so slow that any extra clicks you might have done while the page loads gets accidently clicked onto someone's ad. THEY pay for that mistake. and i simply hit the backbutton to where i wanted to go.
like ads on a bus or train, do i really care? no! do i act on these ads? no!
ads on bill boards off highways. ads on radio, TV, cable TV, etc. we're done with ads. just because there is a population, people place ads. and we're so exposed to ads we actually no longer see them. they are tuned out.
Bush WH had lots of warnings about terrorists
were going to flight school to plan 9-11 attacks
Do you talk tough at the VFW Beav and call yourself Sgt Frank?.
You know those ole boys will kick your azz when they find out you're a liar.
CL:WHY do I always get the feeling that you don`t listen anyway?Are you too insecure too
admit you could be wrong?
Cramer with FB at like 230 P/E ratio it's way way way over priced the price should come down by a factor of 23 !!!!!!!!!!
Facebook had horrible earnings for it's price
|Net Profit Margin||9.06%|
|Market Cap||120.74 Bil|
|Shares Outstanding||2.44 Bil|
Dang.......... That boy left a little puddle of "black pudding" when he left.
CL: Al Gore was a photographer in Vietnam.He wasn`t a true soldier but he still could have been killed.
How many millioaires can you name that served there?GWB didn`t.The few people who saw him
in uniform said they saw him reading magazines.Tough duty !
DLH: I do watch Fox news.For laughs.I like to see grown men cry and bellyach.They always
find a way to blame Obama.It`s supposed to be a bad winter.I`m sure in their meetings they`ll
find a way to blame Obama.Their jealousy is great for laughs.
Barry, You came to this site to push a hate agenda.Like Rush Limbough who won`t endorce
a candidate for fear of being on the losing side,we never hear solutions from either of you.
It`s easy to throw rocks.Rush just plans his show by going the opposite way of whatever Obama
says and the righties fall hook,line and sinker for that.
CL:I`ve heard several people on TV mentioning AL Gore`s warning.Keep believing the right
wing talking point
CL:Al Gore notified the WH and was ignored.Say what you will about Gore being too liberal
on some issues and too conservative on others but he`s a Vietnam vet that loves this country.
Copyright © 2014 Microsoft. All rights reserved.
The S&P 500 manages to keep a deathgrip on 2,000, but key areas of the market are already buckling under pressure.
VIDEO ON MSN MONEY
Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.
Contributors include professional investors and journalists affiliated with MSN Money.
Follow us on Twitter @topstocksmsn.