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Stop Dumping on Facebook -- Hate Wall Street!

Wall Street is childish. It's created this mess, now it wants nothing to do with it except to try to distance itself from the company by raising concerns about valuation and the company's model. Facebook is not Apple (AAPL) nor is it Google (GOOG) or Amazon (AMZN). In fact, I warned investors of this well ahead of its IPO.

But Facebook is not dead either -- let's not get ahead of ourselves. I think we are quick to forget that the company has only had one quarter as a public issue.

Wall Street knew what Facebook was/is prior to going public. Its business model wasn't being questioned then. Today, it is said that the company is struggling due to its inability to monetize mobile. But let's not forget the so-called "death of the PC" was being rumored for over two years suggesting that iPhones and Android mobile devices were taking over.

Sales from Apple, Google as well as the declining PC revenues from Hewlett-Packard (HPQ) and Dell (DELL) supported that theory. Yet, Wall Street failed in its due diligence to not press this issue -- even though Facebook did.

What happened was that investors decided to make up their own minds as to how to value Facebook despite any signs of weakness it might have warned about. Today, with the stock trading over 50% below its IPO high of $45, investors are ready to punish Facebook instead to striving to understand the obvious lesson.

Facebook was far from a mature company. As stated earlier, it is not on the level of a company such as Microsoft (MSFT) or even Yahoo (YHOO) where it could have followed the typical "Under-promise to over-deliver" strategy. Perhaps, that's a sign of Zuckerberg's "youth." But when has that ever stopped the due diligence process?

Facebook's challenge is to prove that it can monetize its 955 million users. Better yet, it needs to demonstrate that it has a mobile strategy that will eventually compel advertisers to believe it can offer immediate returns to businesses from the standpoint of targeted advertising. To that end, I still maintain that an acquisition of Research in Motion (RIMM) is what it needs.

In the meantime, it will continue to battle the lack of understanding while averting threats from the likes of Google. It's a good thing that it has Apple as well as Microsoft on its side -- both Google enemies.

But no enemy is worse than Wall Street when it comes to overblown expectations. I think this is the lesson the company needs to learn and it can demonstrate whether or not it has learned it when it issues its next guidance.

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