NEW YORK (TheStreet) -- Wealth management professionals focus heavily on the financial needs of Baby Boomers. That's understandable: Americans born between 1946 and 1964 own a disproportionate share of U.S. financial assets. An Investment Company Institute study from several years ago revealed that households headed by individuals in the 40 to 64 age-range own 55% of stocks and bonds.
But Boomer investors may be in trouble now. Investors need to pay attention to changes in how companies communicate news that affects stock prices. For decades, technological changes have forced companies to adapt their investor communications strategies. In the past year, regulatory changes have amplified the impact of technological change.
Companies are increasingly turning to social media to announce news.
In April 2013, the Securities and Exchange Commission began allowing companies to announce financial news on Twitter (TWTR) and Facebook (FB). That same month, Zillow (Z) became the first corporation to take earnings conference call questions on those social platforms. According to a recent report by the University of Massachusetts Dartmouth, 77% of Fortune 500 companies keep active Twitter accounts.
The problem for Boomers is that older Americans are less active on social media than members of younger age groups. As a result, middle-aged and older individuals risk being left behind as more companies begin to announce corporate developments on Twitter. Among Baby Boomers age 50 to 64 who use the Internet, only 11% use Twitter, according to the Pew Research Center. That compares with a 35% participation rate for Twitter among those age 18 to 29 who are online.
The financial media has been paying closer attention to Twitter's role in the stock market since August 2013, when Carl Icahn, chairman of Icahn Enterprises (IEP), famously Tweeted about his large stake in the stock of Apple (AAPL). That event prompted a 5% one-day increase in the trading price of the stock.
Dramatic actions by activist investors like Icahn tend to draw the spotlight. Now that more corporations are using Twitter to disseminate routine financial news, the role of social media has taken on an important new dimension. Let it be a lesson to Baby Boomers.
At the time of publication, the author owned Apple shares.
This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.
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 21.2%. 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 151.44% 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