Friday, July 27, 2012

Double Digit Losers: Facebook Inc (NASDAQ:FB) & Starbucks Corporation (NASDAQ:SBUX)

A loss in the second quarter, slowing revenue growth and share compensation costs sent social network, Facebook Inc’s (NASDAQ:FB) shares plunging, after the company announced its first-ever results.

The stock extended losses to below $23.50 in pre-market activity after closing down 8.5 percent at $26.84 on Thursday, declining over 38 percent from its debut in May. The company also did not offer any future guidance, disappointing investor expectations and eroding confidence.

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Facebook reported net loss of $157 million, or 8 cents a share, in the second quarter its bottom-line hit by stock compensation charges incurred by its IPO. In the year-ago period the company had reported net income of $240 million, or 11 cents. Eliminating one time charges, Facebook said it earned 12 cents a share, matching analysts’ forecast.

Revenue in the three months ended June 30 was $1.18 billion, compared to $895 million in the year-ago quarter.

Monthly active users rose to 955 million at the end of June from 901 million in March. But with more users migrating to mobile devices there has been a surge in mobile users, rising 67 percent on year to 543 million users.

While mobile user base has seen a steep increase, mobile advertising has not kept pace with it, adding to investor concerns about the company being able to sustain its revenue growth. Analysts have also been questioning its valuation and feel that the plunging shares reflect the reality of the company's intrinsic value.

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Chief Executive Mark Zuckerberg commented that the company had a clear path to building a strong mobile business, though he did not provide more details.

Since social media companies have very few benchmarks, being a recent phenomenon, the analyst community is also wondering how the company will be able to make money from it billion or so users.

Facebook's capital expenditures more than tripled to $413 million in the second quarter.

Bloomberg had reported on Thursday that Facebook was working with HTC to build a smartphone to take advantage of the popularity of mobiles. However Zuckerberg dashed these hopes saying that it did not make sense for his company to get into hardware.

Seattle-based Starbucks Corporation’s (NASDAQ:SBUX) net income rose 19 percent during the quarter, earning $333.1 million, or 43 cents per share. 

Total revenue rose 13 percent to $3.3 billion. Analysts had estimated profit at 45 cents per share on revenue of $3.34 billion. 

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Revenue growth was led by sales in China and Asia, though its European sales remained flat. 

Starbucks cut its profit outlook to 44 cents to 45 cents per share for the current quarter from a range of 46 cents to 47 cents per share. Analysts were predicting 48 cents per share. 

Shares fell by 10.10% to $47.02 in pre-market session.

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