Facebook stock hits new low
The company has lost nearly 40% of its value since it went public in May.
Facebook (FB) is a market disaster. The stock price is down 20% in two days. Investors are fleeing this thing, even after an earnings report that beat revenue expectations.
We knew where the stock price was headed after watching shares plummet as earnings were announced. The carnage continued Friday, and Facebook shares fell to a record low of $22.28 before bouncing back to close at $23.71. Facebook has now lost about 37% of its value since it debuted at $38 a share in May.
Post continues below.
What's going on? Is the market truly disgusted with Facebook, or is everyone overreacting after a week of disappointing earnings from Apple (AAPL), Starbucks (SBUX), Zynga (ZNGA) and Amazon (AMZN)?
It seems the discontent surrounding Facebook breaks down into four main areas:
1. No guidance. Several companies, notably Google (GOOG), don't give earnings forecasts, and Facebook decided to join the group. But with so many other red flags and unanswered questions surrounding Facebook's future growth and profit, the lack of guidance makes it very hard to get any sense of where the company is headed.
2. Slowing user growth. The number of daily active users was up about 5% in three months. The number of monthly active users was up 6%. A slowdown in user growth was inevitable, particularly in the U.S. Facebook is now seeing user growth in India, Brazil and other countries that produce less ad revenue.
3. Big questions about mobile. Facebook users are clearly connecting more with mobile devices -- 57% of users now access the site that way -- but the company doesn't make much money from them. It can't flood mobile users with ads, and mobile users don't make as many in-game payments as PC users. Investors want to see big progress here, and so far Facebook isn't offering it.
4. Costs are growing. Expenses have nearly tripled from a year ago to $1.93 billion, The Wall Street Journal reports. Much of that is related to stock-based compensation and other payroll expenses. Capital spending more than tripled to $413 million. Operating expenses are going to keep increasing, executives said.
Four brokerages cut their price targets on Facebook after the earnings report. Some analysts were worried about what happens after Aug. 19, when a lockup period expires and some early investors are allowed to begin selling their shares. The concern is that those investors will flood the market with shares and bring the stock price down further.
Still, only one brokerage rates the stock a "sell" and only one rates it a "strong sell," Reuters reports.
"Based on the aftermarket reaction to the earnings, it appears that investors wanted more than a slight beat," Piper Jaffray analysts said in a note.
So the question for investors becomes this: How low will Facebook shares go before they're considered a buy? Or maybe the better question is how much Facebook shares are worth. Estimates have ranged from $7.50 a share to $40 or higher.
The real problem -- and the real reason shares are taking this week -- is that no one knows how much Facebook is worth. Everyone is just stumbling around blindly.
Facebook is a public company -- and as such its true owners are its shareholders -- but the company doesn't give those owners enough information to indicate its worth or its potential. Its success hangs on mobile users, and right now it doesn't have a good way to make money from those users. "Facebook fatigue" is hitting some users, which leads to questions about engagement. And the company is getting increasingly slimy, which I have written about at length.
Facebook is surrounded by question marks, clouds and red flags. It's no wonder shares are hitting these lows.
More from Top Stocks
Secretly (or not so secretly) everybody HATES facebook and what is stand for. Everybody I know is rooting for its eventual failure.
And to all those rubes that drank the purple kool-aid and bought into the IPO......HAHAHA suckers!
You can't eat it. You can't drink it. It dosen't make anything you can use to better your life. It dosen't help any illness. Enough! Just a investment that is volatile so traders can short or go long to make a profit everyday.
All together now CEO BONUSES!!
It's a penny stock. It never had anything to sell, only to give away, and that doesn't bring in the long green.
How it ever got as far as an IPO says more about mass delusion than mass market.
FB should have never gotten this far. Yahoo is just as good and not near as much trouble. This country's adolescents supported FB in the beginning and investors thought it was going to be the best thing since rubber bed sheets.
And there are places on the internet that want people to sign into FB just to dis-like or visit friends or update profiles. DON'T DO IT!! Everytime someone logs into FB or any other site, it gives the site owner more fuel to charge more to its advertisers through pseudo-popularity.
Yahoo is just as good and not near as much trouble. And FB has also hurt itself by widespread advertising of itself and trying to get people to "like" this or that. DO NOT HIT THE "LIKE" BUTTON!!
who wants to go on the internet and turn on "commercials"? I deleted all my real friends and family and personal information. Now I just play games (no money ever spent) with strangers while I wait for someone to call upon my resume. Im not going to help an entity take my information and push ads on my, already streched to the limit, friends and family. End of story.
Copyright © 2014 Microsoft. All rights reserved.
Bill Stiritz owns more than 5% of the company, and has experienced an estimated $145 million in paper losses on his investment.
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.