This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Will Facebook and Zynga Embarrass Analysts?

NEW YORK ( TheStreet) -- If you get uncomfortable when an inordinate number of Wall Street analysts come to a consensus and agree with your sentiment on a stock, you're not alone. You're not being paranoid either.

I'm bullish on Facebook (FB - Get Report). I am also bullish Zynga (ZNGA - Get Report). Most of Wall Street is as well.

TheStreet's James Rogers ran down the post-IPO quiet period analyst coverage on Wednesday in an article titled "Facebook: Who's Saying What?"

The lowest price target I saw was $34 from Credit Suisse. Most came in somewhere between $38 and $45, with JP Morgan among the most positive.

My review of analysts' comments shows that they agree with me about Facebook's ability to leverage its size and create a wide-ranging ad network to challenge Google (GOOG), and monetize its growing base of mobile users.

An even more bullish consensus encapsulates analyst sentiment toward Zynga. I won't bore you with details you've likely already seen, but price targets in the teens and reiterated "buy" ratings, particularly in defense of the stock after a selloff, are quite common. The analyst comments coincide with my bullish view on the stock.

On the surface, this might sound like a good thing. The big money agrees. What can be wrong about that? Well, we all know that you cannot necessarily trust what the big money says.

The Netflix (NFLX - Get Report) experience from 2011 helps illustrate this point.

Consider what I had to say over at Seeking Alpha this past December about Goldman Sachs analyst Ingrid Chung's coverage of Netflix:
... has anybody heard from Ingrid Chung at Goldman Sachs? ... After Netflix's disastrous Q2 and weak Q3 guidance in July, Chung waxed bullishly, not only reiterating a buy rating and her $330 price target, but raising EPS estimates from 2011 through 2013.
Before you read this next sentence, call some family, friends or co-workers over to your computer screen, because there's nothing like sharing a laugh with others around the holidays. For 2012, Chung predicted Netflix would post EPS of $7.69.

While things seem to be a wee bit more optimistic, Netflix, according to its first quarter-letter to shareholders, expects to come in around break-even and possibly even post a loss. That's going to make $7.69 for the year next to impossible.

To be fair, Chung had plenty of company in being wrong. That said, I am not sure I have ever seen a worse performance than hers.

Luckily, throughout 2011, I was adamantly on the opposite side of the trade. But now, with regard to Facebook and Zynga, I find myself in agreement with the same crew of folks who touted Netflix. That leaves me slightly concerned.
1 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
SYM TRADE IT LAST %CHG
ZNGA $2.51 0.40%
FB $87.45 -2.70%
NFLX $97.62 -7.40%
AAPL $109.35 -2.70%
GOOG $598.00 -2.70%

Markets

Chart of I:DJI
DOW 16,374.76 +23.38 0.14%
S&P 500 1,951.13 +2.27 0.12%
NASDAQ 4,733.4970 -16.4820 -0.35%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs