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
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Earnings Preview: Can Facebook and Zynga Stop the Bleeding?

NEW YORK (TheStreet) -- After the biggest initial public offering in history, Facebook (FB) has disappointed investors large and small. Zynga (ZNGA) Facebook's big driver in traffic, is performing more like a lead zeppelin than a Led Zeppelin.

FB ChartFB data by YCharts

Facebook is anticipated to report weak second-quarter earnings after the close on July 26. The consensus estimate is currently 9 cents a share. Based on $29 a share and 9 cents earnings for the quarter, the price-to-earnings multiple is over 80. I am not sure the International Space Station is at a much higher altitude. At the current level of profits, it will take over 80 years of earnings to pay for one share of stock.

Facebook trades an average of 13.3 million shares a day with a market cap of $65.7 billion.

Over half the analysts covering Facebook rate it as a buy or strong buy; 14 of the 27 analysts covering the company give a "buy" recommendation. 11 analysts rate it a "hold" and two recommend selling.

Analysts are increasingly more bullish with Facebook; 12 out of 27 analysts now rate Facebook a "strong buy," up from six analysts a month ago. Compared to three months ago, even more analysts are rating this company as a "strong buy."

The average analyst target price for Facebook is $38.50. At a price of $38.50, it will take over 100 years of profits to pay for one share.

An investment in Facebook is an investment based on the company rapidly growing the bottom-line profits. I believe Facebook has room to grow revenue and profits, but expecting a fivefold increase is beyond my expectations. Facebook needs at least a fivefold increase to justify a price above $38.50.

TheStreet's Harry Schiller provides another viewpoint on Facebook. (You need a Real Money Pro account to read, but Schiller's analysis makes it worthwhile.)

Revenue year-over-year has increased to $1.97 billion last fiscal year compared to $777 million in the previous year. The bottom line has rising earnings year-over-year of $606.00 million last fiscal year compared to $229.00 million in the previous year.

1 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

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
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

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

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, 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
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

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

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 16,943.81 +28.74 0.17%
S&P 500 1,967.57 +2.89 0.15%
NASDAQ 4,415.49 +19.2860 0.44%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto
Advertising Partners

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs