Facebook stock avoids steep drop as Street rethinks results

Thu Jan 31, 2013 5:40pm EST

The Facebook logo is pictured at the Facebook headquarters in Menlo Park, California January 29, 2013. REUTERS/Robert Galbraith

The Facebook logo is pictured at the Facebook headquarters in Menlo Park, California January 29, 2013.

Credit: Reuters/Robert Galbraith

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(Reuters) - Shares of Facebook Inc recovered from an 8 percent slide on Thursday, finishing the regular session down less than 1 percent, as Wall Street's initial alarm over mobile revenue results and spending plans subsided.

Facebook said on Wednesday that fourth-quarter mobile advertising revenue doubled from the third quarter, but the results failed to live up to some investors' high expectations. Chief Executive Mark Zuckerberg's comments about boosting spending in the coming year signaled that profit margins will be under pressure, adding to concerns.

"The initial fast money said earnings are going down, numbers are coming down, the stock is going to get hit," said Macquarie Research analyst Ben Schachter.

"But the more people thought about it throughout the day, the momentum changed and longer-term investors won out, saying these are investments we think they should be making," he said.

Facebook has long established itself as one of the most popular websites with more than a billion users, but investors have worried that until the company's mobile advertising strategy takes off, revenue growth will remain shaky.

Three brokerages downgraded the stock, but most analysts said investor expectations were too high and Facebook's mobile advertising business was a good long-term bet.

Pivotal Research Group analyst Brian Wieser upgraded Facebook to a "buy" rating on Thursday, calling Wall Street's reaction to the results "downright dazed."

The stock market incorrectly interpreted Facebook's "mobile revenue figures as a negative when in fact they are part of a story that we can see as qualitatively more favorable," Wieser said.

Shares of the company finished regular trading on Thursday down 0.8 percent at $30.98 on the Nasdaq. Earlier in the session, the stock fell as low as $28.74. Facebook stock has lost more than a quarter of its value since its botched debut in May.

The company reported a better-than-expected fourth-quarter profit on Wednesday and said mobile advertising revenue doubled to $306 million, suggesting it was making inroads into handheld devices such as smartphones and tablets.

Investors were looking for at least $350 million in mobile advertising revenue, Piper Jaffray analyst Gene Munster said in a note to clients.

"While the trajectory of mobile growth may not be as steep as some investors were hoping, the theme of mobile as the future of Facebook remains intact," Munster said.

BMO Capital Markets analyst Daniel Salmon, however, said Facebook's 2013 stock performance would not be dictated by its ability to generate mobile ad dollars. He downgraded the stock on Thursday to "market perform" from "outperform."

Salmon said new catalysts were necessary to drive Facebook's stock price up.

(Reporting by Neha Alawadhi and Sayantani Ghosh in Bangalore and Alexei Oreskovic in San Francisco; editing by Saumyadeb Chakrabarty and Matthew Lewis)

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Comments (2)
GodLeros wrote:
Aaaah, this is just lip service, really.
If facebook did nothing.. at all, about advertising opportunities mobile, the stock would grow. While the U.S. may be less interested in Facebook, there are countries that it is growing leaps and bounds. AND, yes, I know there is a trend of people going completely Mobil. I am not saying something else will not come along OR if they do not move better on Mobil service (for advertisers) they Won’t die off.. But this will be a long time from now.

Jan 31, 2013 4:51pm EST  --  Report as abuse
backhoe wrote:
If Facebook keeps posting unwanted sexual ads, I will try something else. You can’t even delete the ads. There is no way to stop them. Facebook is going downhill fast.

Feb 01, 2013 10:50am EST  --  Report as abuse
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