Wednesday, July 18, 2012

Facebook Inc(NASDAQ:FB) Breaks 6-Day Fall Chain on Cautious Trading

Facebook Inc(NASDAQ:FB) shares are struggling in the run-up to an earnings report, which is due next week, will most probably witness a slow-down in the second quarter. However, the shares of Facebook Inc (NASDAQ:FB) gained 2.21% to $28.71 in the morning hour. Through yesterday, the stock had dropped (FB) 26% since its May 17 initial public offering.

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The company is under pressure to add new users in certain markets, including the U.S., that make up a significant portion if FB’s sales, according to report by Capstone Investments. A forecasted slowdown in sales led analysts to cut their second-quarter revenue projections to $1.16 billion in the past month. The prediction for profit, excluding some items, fell 10% to 11 cents a share.

Benjamin Schachter, an analyst at Macquarie Securities USA Inc said that the people are concerned about the growth profile of Facebook. The analysts also said that more risk is being reflected in the lower stock price.

Rory Maher, an analyst at Capstone said that U.S. users on Facebook’s site declined 1.1%, citing analysis of Facebook users in more than 200 countries. He also feels that penetration in the U.S. is reaching maturity, which will cast a shadow on revenue growth and user growth and hence is a reason to be concerned about.

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Data compiled by Bloomberg shows that shares of the company will probably decline further as Facebook nears the end of its “lockup”, a post-IPO period during which Securities and Exchange Commission regulations bar insiders from unloading shares. Some employees will be able to freely sell stock next month.

Another concern for investors is the company’s ability to make money from advertisers vying to reach social-network users on mobile devices. Ads shown on mobile phones are smaller and may be less appealing to advertisers and less lucrative than marketing messages on bigger computers.

If second-quarter sales meet projections, Facebook would see an increase of 30% from a year earlier. Revenue rose 45% in the first quarter, as compared with 55% in the fourth quarter. Sales more than doubled in each of the three periods before that.

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