Facebook's stock weather forecast: Thunderstorms
Here's why shares continue to move lower.
Facebook (FB) is not only a great American success story, it's also a company that attracts some serious dark clouds. In the past, these clouds took the form of lawsuits from the Winklevoss brothers and Mark Zuckerberg's co-founder Eduardo Saverin. However, as the late Biggie Smalls said, "More money, more problems."
Facebook's new dark clouds are worrisome for investors.
Our Cheat Sheet investing framework always starts with a requirement for a "C = Catalyst for a Stockʼs Movement." In the case of Facebook, the strongest catalysts on the horizon are negative. Let's take a look:
1) Federal Trade Commission inquiries into the billion-dollar Instagram deal;
3) Shareholder lawsuits over IPO shenanigans;
4) Slowing growth in latest earnings announcement;
5) Major problems monetizing user-base;
6) An alleged move away from core competencies into the highly risky smartphone hardware space;
7) Core gaming partner Zynga (ZNGA) is diversifying away from the Facebook platform;
8) Increasing competition from Google+ (GOOG), Path, Pinterest, and many more niche social networks.
In addition to these major issues facing the company, Facebook's stock is highly valued and currently not discounting all these negative catalysts. Am I missing other negative catalysts? If so, please let me know in the comments below.
Damien Hoffman is the Editor-in-Chief at Wall St. Cheat Sheet. As of this writing, he did not own a position in any of the aforementioned stocks.
More from Wall St Cheat Sheet
Facebook is OVER. No-one under the age of 25 even uses it anymore. It's mostly now used by grandmothers trying to see photos of their grandkids at college. I see a $12 price within 6 months... and by September would not surprise me.
The latest move, up $1 per share in less than 30 minutes. The more step function trading I see in this stock the less I want to be in it.
I wouldn’t be surprised of Zuckerberg is buying back shares that he sold at $38.
Question: I’m just curious Mary Schapiro, how exactly does the SEC define stock price manipulation?
Anybody who would buy into FB is out of their mind. FB produces nothing and has no real assets to speak of.
In addition a p/e ratio of 88 to 1 is so out of line that any sane person would laugh at the idea of owning a part of the company.
Another example of greed. there is no reasonto invest in Facebook. I like the site, but as a financial tool it is hollow. It makes nothing, it sell snothing and it does not offer a paid for service.
If the investors had done homework and not just tried to jump on a get rich quick scheme, they would have known this.
I do not feel sorry for one of the people that lost money.
Facebook got whacked because:
(A) It is a business platform that does not make anything. It is based on a fad and is at the mercy of the ephemeral, rapidly changing tastes of its main target demographic. This demographic does not click through ads or purchase the products advertised thereon---e.g. GM. FB is like a movie set. Peek behind the facade and see how fragile the structure propping up this company really is.
(B) The small investor has been suckered enough by Wall St and banksters. You guys move and manipulate the markets for your own ends. Also, we get it---we aren't permitted to profit from IPOs. These events are hyped beyond belief by a complicit, bought and paid-for media and are typically losers for all but the insiders.
(C) Even a few of the smarter institutional funds figured it out. How much FB did Berkshire Hathaway buy? Zilch, nada, zero. Buffett wouldn't touch it. He also said he would not buy Apple or Google at current values---too risky. Granted, this is not the business model BH is based on. But in his comments, he also said if BH engaged in short-selling, he would not short Apple or Google. Nothing about FB. So, was WB implying that FB was ripe for short-selling?
Look for the stock to be trading under $15, and possibly under $10/share by the end of the year.
Also, look for the next great thing (which all the kids are already waiting for) to suck the life out of FB. Its worth will be defined by the residual, limited shelf life value of the data it has mined from the gullible for marketing purposes. Most kids (13-30) will tell you, "FB is over."
PS---a FB phone? Right...as people are beginning to figure out how much private information they have been conned out of due to ever-changing, dubious privacy policies, I'm sure they'll be all over signing up for another device that spies on them in even more innovative, devious and secretive ways.
GM's decision to pull ads should have been a clear sign of the future struggles of generating ad revenues. Google made its money primarily through BtoB ad programs, not consumer focused marketing. The only way that I can see Facebook flourish is if ultimately its user-base is addicted to using it and willing to pay a monthly subscription fee to access it. Good luck on that one! The novelty is already wearing off. 83.1 price to earnings speaks volumes, too!
that makes no products and gives away memberships for free. In order for Facebook to make money, they must increase their numbers of subscribers. The number must keep rising and rising whit out stopping. This is not a reality.
You might also include:
Leader technologies vs. Facebook in which Facebook was found guilty on 11 of 11 counts of patent infringement. The verdict was set aside but an appeal is pending. The patent infringement claims stem from Facebook allegedly stealing the code for the engine that runs Facebook. If Leader's appeal is successful the penalties could be severe, even potentially shutting down Facebook's servers. Look into it because I have and this is what I've found. Please correct any of this if it is wrong but either way I would like to know more about it.
Copyright © 2013 Microsoft. All rights reserved.
Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.
The stock fell Wednesday with the news that the company missed on both earnings and revenue in its most recent quarter.
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.