Facebook's stock tumbles after 1st public quarter

Steve Williams

Site Founder, Site Owner, Administrator
By BARBARA ORTUTAY, AP


NEW YORK — Facebook's first earnings report as a public company had solid numbers, but in the end it landed with a thud — much like its rocky initial public offering two months ago.

Facebook reported stronger-than-expected revenue and a gain in user numbers Thursday. But investors weren't impressed and after a brief spike, its stock fell more than 10 percent, or $2.74, to $24.10 in after-hours trading. The decline means Facebook's stock will most likely open at its lowest level since going public.

It's another big disappointment for the Harvard-born company that was supposed to usher in the next Internet boom.

"They didn't break any banks," said Debra Aho Williamson, an analyst at research firm eMarketer. "They did not come out any better than anybody had expected."

What may have rattled investors is that Facebook's revenue growth has slowed. Between 2009 and 2010, the company's revenue nearly tripled. In the first quarter of this year, revenue climbed 44 percent. In the second quarter, Facebook Inc.'s revenue increased 32 percent to $1.18 billion from $895 million a year earlier. Analysts, on average had expected slightly lower revenue of $1.16 billion, according to FactSet.

For a freshly public company such as Facebook, the decelerating revenue growth is a concern. A bet on fast-growing revenue is the reason investors are willing to value new companies highly even if they are not making a profit. Another reason jittery investors may be even more nervous: Facebook didn't offer investors and financial analysts its outlook for the rest of the year.

Meanwhile, the number of people who access Facebook regularly inched closer to 1 billion. The company said it had 955 million active monthly users as of June 30, up 29 percent from a year earlier. At the end of the first quarter, it had 901 million users.

Overall the Menlo Park, Calif.-based company posted a loss of $157 million, or 8 cents per share in the April-June period, mainly due to compensation expenses it incurred when it paid $1.3 billion in restricted stock and related taxes for employees as part of the IPO. The loss compared with earnings of $240 million, or 11 cents per share, in the second quarter a year ago. The company's adjusted earnings of $295 million, or 12 cents per share, matched Wall Street's expectations.

The results come two months after Facebook's stock flopped on its first trading day, on May 18. The day began with glitches with the Nasdaq stock market that delayed trading by half an hour. It didn't get much better from there. Despite months of hoopla that had investors thinking it would soar, the stock closed just 23 cents above its $38 IPO price. It has not reached that level since.

Though Facebook had a lot riding on its first public report, Wall Street's outlook was muted, which could be another reason for the stock's decline.

"People are waiting for a really huge growth moment in revenue, advertising, dollars per user," said Alex Ashby, research analyst at Global X Funds, a provider of a social media exchange-traded fund. "People had expected that Facebook is going to revolutionize advertising...we think it's still a definite possibility, but maybe further down the road."

Investors were holding out hope that Facebook would far exceed expectations _even though the company effectively warned investors before its IPO that Wall Street's expectations were too high. In a filing issued a week before its IPO, for instance, Facebook said its mobile users are growing at a faster pace than the number of ads on its mobile platform.

Analysts took that as a sign that their estimates were out of whack and many of them reduced their estimates for Facebook's projected revenue and earnings.

Even though the number of people who use mobile devices and tablet computers to access Facebook had been growing fast, Facebook didn't start showing ads on its mobile app until this spring. Facebook had 543 million active monthly mobile users at the end of the quarter, a 67 percent increase from a year earlier.

In a conference call with analysts, CEO Mark Zuckerberg said Facebook's mobile users are more active than those who use the personal computer version.

"On average mobile users are around 20 percent more likely to use Facebook on any given day," he said. "So mobile not only gives us the potential to connect more people with our services and also gives us the ability to provide more value and more deeply engaging experience."

Facebook said its revenue from advertising totaled $992 million, a 28 percent increase from the same quarter last year. That number accounted for 84 percent of total revenue. The company did not say what portion was from mobile advertising. The rest came from payments and other fees, money Facebook makes from Zynga games and other apps.
 

Phelonious Ponk

New Member
Jun 30, 2010
8,677
23
0
When I read these kinds of things I'm never sure how to react. It could be that, in spite of its reasonably good performance, Wall Street analysts see FB as under-monitized and still over-valued. But then I put that kind of benefit of the doubt up against Wall Street's typical daily behavior and wonder if I'm giving them far more credit than they deserve. More often than not, they behave like a bunch bi-polar insomniacs off their meds and at the blackjack table at 4 a.m.

Tim
 

FrantzM

Member Sponsor & WBF Founding Member
Apr 20, 2010
6,455
29
405
When I read these kinds of things I'm never sure how to react. It could be that, in spite of its reasonably good performance, Wall Street analysts see FB as under-monitized and still over-valued. But then I put that kind of benefit of the doubt up against Wall Street's typical daily behavior and wonder if I'm giving them far more credit than they deserve. More often than not, they behave like a bunch bi-polar insomniacs off their meds and at the blackjack table at 4 a.m.

Tim

Goodness gracious Tim.. DO I have to agree with you so often??? My sentiments exactly and to know that the world economy runs these days on such roulette is to me cause for concern. Wall Sreet and other of its ilk use to be a tool for capitalization, they have slowly become a gigantic casino that is playing with people lives and hard earned money... Able to destroy whole countries economies on rumors ...
Not that I expected much from Facebook but this is he same mentality at play here when Apple stock fell becasue they had a slightly below expectations quarter.. The way the Street runs it would seem that Apple should sell an iPhone to the 6 Billions or so earthlings every year ... Even Apple valuation would suggest that this is exactly what they expect to happen. I must say that I don't get it...
 

Phelonious Ponk

New Member
Jun 30, 2010
8,677
23
0
Goodness gracious Tim.. DO I have to agree with you so often??? My sentiments exactly and to know that the world economy runs these days on such roulette is to me cause for concern. Wall Sreet and other of its ilk use to be a tool for capitalization, they have slowly become a gigantic casino that is playing with people lives and hard earned money... Able to destroy whole countries economies on rumors ...
Not that I expected much from Facebook but this is he same mentality at play here when Apple stock fell becasue they had a slightly below expectations quarter.. The way the Street runs it would seem that Apple should sell an iPhone to the 6 Billions or so earthlings every year ... Even Apple valuation would suggest that this is exactly what they expect to happen. I must say that I don't get it...

Actually, Frantz, I think you do get it. Every system has its balance point. The bloody, insatiable aggression of Rome built great civilizations...until it pushed them into darkness. Socialism, by definition, is not a bad thing. But pushed over its edge by the hunger of the powerful and it can become nothing short of evil. We in the West, particularly in America, have assumed that capitalism has no endgame, no point beyond which it becomes manifestly destructive. We have assumed, instead, that free markets are a force of nature, a self-balancing economic ecosystem that will destroy its own weaknesses and propigate its own strengths.

As it turns out, that's not the case. Humanity takes over, it seems, and failure to balance freedom with restraint goes wrong very quickly. In America we have pushed the free market philosophy over the edge. We've done it very deliberately, very systematically over three decades. We've done it under Republican, Democratic and bi-partisan rule. We have pushed the system beyond its balance point and put the leverage in the hands of those who have the greatest opportunity for short-term gain and the lowest motivation for long-term responsibility. From this vantage point, look carefully enough and we can now see what we would actually get with completely unregulated, unfettered markets, with the middle class vanquished, all the power concentrated at the top and the nation dependent upon the tender mercies of the few. It's not hard to recognize if you know your history. We once called it feudalism.

I don't think it will ever go that far. But I think the cure is going to be very, very ugly. I worry for my children and grandchildren.

Tim
 

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