How Will Video Chat App Speculation Affect Facebook (FB) Stock?

NEW YORK (TheStreet) -- Facebook Inc. (FB) is reportedly working on a video chat app to rival Snapchat, which could be launched later this month, according to the Financial Times.

Facebook CEO Mark Zuckerberg is said to have started working on the app, called Slingshot, after he failed to impress Snapchat creators Bobby Murphy and Evan Spiegel with last year's $3 billion takeover bid.

Slingshot will allow users to send quick video messages to one another with only a few clicks of the screen, the Financial Times reports.  

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Those mentioned in the Financial Times report said while it is possible the app will be released this month, it is also a possibility Facebook will decide to scrap the "top secret" project all together.

Shares of Facebook are up 0.19% to $58.13 on Monday.

TheStreet Ratings team rates FACEBOOK INC as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:

"We rate FACEBOOK INC (FB) a HOLD. The primary factors that have impacted our rating are mixed some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures and impressive record of earnings per share growth. However, as a counter to these strengths, we find that the stock itself is trading at a premium valuation."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • FB's very impressive revenue growth greatly exceeded the industry average of 21.3%. Since the same quarter one year prior, revenues leaped by 71.6%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Although FB's debt-to-equity ratio of 0.02 is very low, it is currently higher than that of the industry average. Along with this, the company maintains a quick ratio of 13.15, which clearly demonstrates the ability to cover short-term cash needs.
  • Powered by its strong earnings growth of 177.77% and other important driving factors, this stock has surged by 117.74% over the past year, outperforming the rise in the S&P 500 Index during the same period. Setting our sights on the months ahead, however, we feel that the stock's sharp appreciation over the last year has driven it to a price level which is now relatively expensive compared to the rest of its industry. The implication is that its reduced upside potential is not good enough to warrant further investment at this time.
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. When compared to other companies in the Internet Software & Services industry and the overall market, FACEBOOK INC's return on equity is below that of both the industry average and the S&P 500.
  • You can view the full analysis from the report here: FB Ratings Report
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