Thursday, July 19, 2012

Facebook Inc(NASDAQ:FB): Investors Turn Pessimistic before Earnings

The shares of the most popular social networking site, Facebook Inc(NASDAQ:FB) is under immense pressure due to the earnings report that the company is supposed to issue next week. The reports are likely to reflect the shrinking of the share value of the company in the second quarter.
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Following the research conducted by Capstone Research, the company is trying hard to add more and more users to its account, especially in some particular markets including U.S. This is because of the sheer fact that the company makes most of its sales in these market areas.
However, the anticipated deceleration in the growth led analysts’ to peel the second quarter revenue projections by 4 percent to $1.16 billion in the past month. The forecast for per- share profit, excluding some items, also fell by 10 percent to close at 11 cents. Though the U.S. users on Facebook’s site have streamed down by 1.1 percent, the efforts of the company in penetrating the U.S. markets is reaching to its prime, suggesting for revenue growth and user growth.
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Where on one hand people are concerned about the growth profile of the company, on the other hand the shares of Facebook Inc. would further decelerate as the company nears the end of its “lockup”. “Lockup” is a post-IPO period during which Securities and Exchange Commission regulations restricts insiders from unloading shares. However, according to reports, some employees will be able to freely sell stock next month.
The company’s potential to generate money from advertisers vying to reach social-network users on mobile devices is yet a concern for the investors. In an endeavour of the company to improve on the sales and increase growth, the company is focussing on adapting the services to mobile devices, where growth in usage is outpacing sales from mobile ads. “Growth in use of Facebook through our mobile products, where our ability to monetize is unproven, as a substitute for use on personal computers may negatively affect our revenue and financial results,” Facebook said in an SEC filing at the time. However, the ads that are run on mobile devices are smaller in size thereby being less appealing and less lucrative than marketing messages on bigger computers.

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