This Day On The Street
Continue to site
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

Facebook Diary: Another Day, Another 52-Week Low

NEW YORK ( TheStreet) - In watching the drastic drop of social media giant Facebook (FB - Get Report) the biggest question for investors, aside from whether the company will soon become an acquisition candidate, is, "Where is the bottom?"

In a recent interview with Lindsey Bell, Jim Cramer, founder of as well as host of CNBC's "Mad Money," offered his opinion on what it would take to fully recognize the bottom on the stock.

What I felt stood out the most from all Cramer offered is he believes that in order for Facebook shares to truly bottom, it would first require not only evidence of insider buying but analysts will have to downgrade the stock while also lowering their estimates.

While I agree with Cramer, I wonder if any of the three scenarios will play out -- much less all three at the same time. The reason is that Wall Street comes across too often as caring more about being perceived as right than as smart. After all, this is precisely the reason why Facebook and its investors are in this mess in the first place -- a mess borne out of its hype-filled IPO that Wall Street has left for others to clean up.

My article suggesting that Apple (AAPL - Get Report) would make a play for Facebook should the stock drop below $20 was not well received by some readers. But for me it's more than just about what makes sense. It's also being opportunistic.

Whether or not Apple acquires Facebook is not the issue -- rather, if the valuation is right, Apple would love the chance to do two things.

First, it would revel at the prospect of being able to beat Google (GOOG) at its own game. Second, it would love to put to rest once and for all the Steve Jobs-Mark Zuckerberg comparisons. It can do that by taking over Facebook and turning it into more than what it is today - just a great concept.

However, for Facebook to avoid further embarrassment it has to stay above $20. The question now is whether it can do it. The stock continues to be in a freefall while displaying an inability to find its legs. As I've said previously, should it fall below that all-important psychological level of $20, the next perceived stable platform has to be $15.

However, with the stock now having closed on Wednesday at $20.88, or 45% below its IPO price of just three months ago, Facebook has just received an upgrade by Bernstein from sell to hold with a price target of $23, representing a P/E of 64 times next year's earnings.

However, it takes more than valuation to assess Facebook's investment worthiness. There are other concerns surrounding the expiration of the lockup period where early investors will be free to unload the stock and move on with their lives.

This possibility lends support for why the stock may not have yet reached bottom. Also, as Cramer pointed out, Bernstein is likely not doing Facebook any favor by having issued an upgrade. Lowering estimates to levels the company can easily meet and exceed would signal an eventual buying opportunity.

I think the company will prove eventually that it is more than just a fad. But it has to prove first that in addition to being a good idea it has a better underlying business. Until then, the smart play it to avoid the stock.

At the time of publication, the author was long AAPL and held no position in any of the other stocks mentioned.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

Richard Saintvilus is a private investor with an information technology and engineering background and has been investing and trading for over 15 years. He employs conservative strategies in assessing equities and appraising value while minimizing downside risk. His decisions are based in part on management, growth prospects, return on equity and price-to-earnings as well as macroeconomic factors. He is an investor who seeks opportunities whether on the long or short side and believes in changing positions as information changes.

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
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
AAPL $95.03 -2.90%
FB $116.73 7.20%
GOOG $691.20 -2.10%
TSLA $247.54 -1.60%
YHOO $36.58 -1.00%


Chart of I:DJI
DOW 17,830.76 -210.79 -1.17%
S&P 500 2,075.81 -19.34 -0.92%
NASDAQ 4,805.2910 -57.85 -1.19%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs