The bears -- including lots of analysts who were bullish going into the quarter and subsequently downgraded the stock Thursday morning -- are seizing on how the company is spending like a drunken sailor and may not have all that much to show for it. These investors want results now. They don't want to hear Mark Zuckerberg say, "We aren't operating to maximize our profit this year. We're doing what we think will build the best service and business over the long term."
That's the kiss of death for all of the upside-surprise folks out there, the ones who figured Facebook had hit the magic formula for mobile and would show an explosive revenue and profit number. They aren't satisfied with the 17 cents vs. the 15 cents earnings-per-share number. They needed something like 20 cents to 25 cents in order to stay in the stock, or cover their shorts, or upgrade from buy to super de-duper buy.
It's ironic that the bulls look at the same exact statement from Zuckerberg and love what they see. Put simply, they see the next Amazon (AMZN). They see a company with such a huge growth path that the smartest thing the company can do is to spend as much as possible, thus getting advertisers to spend fortunes trying to reach their targets among the more than 1 billion users of this product.
The bulls are thinking not about earnings this year, which they don't care about in the least, but to the outyears -- say, 2015 -- when the spending will begin to pay off. They are patient, as they had been with Amazon, which became one of the great performers of all time simply because its visionary founder and CEO, Jeff Bezos, never wavered in having a long-term vision. In fact, these bulls would fear for Facebook if it weren't investing. That would have meant the hyper-growth phase is already over, and they would have been stuck with another Intel (INTC) or Microsoft (MSFT) -- played-out stocks that just generate a lot of cash but muster little growth.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
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.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
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.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV