This Day On The Street
Continue to site right-arrow
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!

Facebook: A Closer Look

Stocks in this article: FB

NEW YORK (TheStreet) -- Facebook (FB) reported its third-quarter financial results Wednesday afternoon after the market closed. By first accounts, the business looked good. According to a research note, Canaccord Genuity analyst Michael Graham increased his target price to $62 from $60 and reiterated his buy rating. He also increased his 2013 and 2014 EPS and revenue estimates.

While everything looks great according to the numbers, Graham cautioned that margins may be affected as the social network will need to spend more R&D money to efficiently monetize its strongest growing segment, mobile advertising.

But this rosy outlook certainly did not reflect the mood of traders. The initial knee-jerk reaction to the numbers was extremely positive, and the stock price shot up beyond the implied move. But, as the conference call wore on, there were a few gotchas, in particular the apparent flight of teenage users from the ubiquitous social platform. After that, the stock price plummeted, as much as 1% lower at the close.

The morning after, Facebook's price dropped even further, and whipsawed about, along with the broader market until it finally gained some footing and closed up $1.20 for the day, or 2.44%. The stock was up 1.88% to $51.19 shortly after market open on Friday.

The comment about teenagers was a huge surprise, as investors know advertisers see this as a huge opportunity lost before it can even be realized. I also suspect that traders were still a bit tattered by the Fed hinting at a premature end to QE3 just a couple hours prior to the earnings call.

It is becoming clear that many investors are still not entirely convinced that this growth in advertising can be sustained. There's the lingering concern that some other disruptive technology or competitor may appear on the horizon, and bite into Facebook's fragile and perhaps de minimis revenue model.

In the early days of the company, when subscriber growth was increasing at exponential rates, kids were the primary users, despite the age restrictions for user accounts. The kids grew older, and slowly adults became more interested in Facebook. There are plenty of people out there eager to see what others are up to and also devote long hours to updating their statuses.

1 of 2

Select the service that is right for you!

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 17,959.44 +154.64 0.87%
S&P 500 2,078.54 +7.89 0.38%
NASDAQ 4,781.4240 +16.0440 0.34%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

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