It was not that long ago when it appeared that Facebook Inc (NASDAQ:FB) shares were making a comeback. After a slow start, things were looking up. And then came the company’s fourth quarter results on January 30. Since then, the situation with Facebook shares has been anything but on solid ground.
Since the company’s fourth quarter results were released, there have been a handful of downgrades.
As noted by the Los Angeles Times, Facebook Inc (NASDAQ:FB) stock is struggling to regain its footing.
“The stock has tumbled 11% since then. It's off 3% to $27.47 on Tuesday after BTIG analyst Richard Greenfield cut his rating and set a price target of $22.”
Forbes has the rundown on what Greenfield has to say about this decision:
“We upgraded Facebook to Neutral in late November 2012 because we believed advertising revenues were set to notably exceed investor expectations, as we saw Facebook pushing a significantly higher ad load into users’ mobile news feed during Q4 2012.”
“Since then, expectations for Facebook have risen notably, the company reported Q4 2012 revenues slightly above our estimates and talked to significantly higher than expected cost growth in 2013 impacting margins. While we are raising our revenue forecasts for 2013-2015, we are below consensus, especially in 2014, and our adjusted EBITDA estimates are even further below consensus. With revenue and EBTIDA growth set to disappoint, we believe a Sell rating is now warranted.”
With all this in mind, you may be wondering what Facebook Inc (NASDAQ:FB) must do to get back in the good graces of those on Wall Street. While there is no definitive answer, Greenfield shares more insight:
“Simplistically, with a Facebook app on your phone with push notifications, consumers end up touching Facebook far more often as they transition to mobile usage. Yet, the question Facebook has yet to answer is how mobile is affecting aggregate engagement, meaning total time spent on a monthly basis. We suspect the more consumers shift to mobile, the less total time they are spending with Facebook. While the CPMs on mobile are significantly higher (you have to stare at the ads which are quite large relative to the screen size), we struggle to believe Facebook can continue to ramp the ad load on mobile the way they did in Q4 2012.”
That pretty much says it all. Once again, Facebook Inc (NASDAQ:FB) is being forced to prove that its mobile strategy has the ability to pay off in the long run.
What are your thoughts on where FB shares are headed? Do you agree with the decision of BTIG analyst Richard Greenfield to cut his rating?
DISCLOSURE: I have no positions in any stock mentioned.
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