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Facebook had one of the most highly anticipated IPOs of all time and its first earnings report is being preceded by a similar level of excitement.
As much as I have been critical of the company's handling of its IPO, it does deserve some credit for having rebounded slightly from its recent lows of $25. However, I would highly recommend that holders of the stock sell ahead of the company's earnings report, which is scheduled for after the market closes Thursday.
The reason for the concern is simple. Facebook's user growth appears to have peaked in November, and unique visitors to the site actually declined in recent months. Remarkably, rival
Google's(GOOG) Google+ service has continued to gain traction recently.
ComScore, which specializes in Internet data and research, recently revealed a drop in Facebook's unique visitors. Although it was not a significant drop, the research firm did suggest it would last longer than anyone anticipated. This should raise a big question mark for investors.
As for the quarter, analysts are expecting earnings per share of 15 cents on revenue of $1.18 billion. Investors will focus on the company's ability to sustain user growth and on how it monetizes mobile users.
The company started its mobile initiative by incorporating sponsored stories into its newsfeeds. Any upside surprise in this area could send shares soaring. However, I think that is highly unlikely in light of the questions about user growth. The smart play here is to sell the stock ahead of the report and wait for shares to return to the $25 level or lower.