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Facebook Hails Its Mobile Evolution... Market Not Impressed

Mark Zuckerberg
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Mark Zuckerberg

Impressive quarterly earnings from Facebook did little to keep analysts at bay or placate bearish investors, all of whom appeared broadly negative on its stock in early Thursday trading.

The company topped Wall Street's expectations by posting earnings of 17 cents per share, on revenue of $1.59 billion last quarter. Mobile revenue — the holy grail of most technology giants looking to earn money from smartphone and tablet users — also surged during the quarter.

Yet that — and Facebook's declaration of itself as a "mobile company" as smartphone and tablet users exceeded those using the web — wasn't enough to prevent analysts from damning Facebook's bottom line with faint praise.

(Click here to get the latest quotes for Facebook.)

Jefferies, Citibank, and Stifel Nicolaus all downgraded Facebook before the start of trading on Wall Street, even as they cited the beneficial impact of mobile on the social network's bottom line.

Stifel cited "significant margin compression" ahead for this year, while Citi saw a few red flags in the company's ad revenue growth and a potential increase in research and development costs. That, the bank added, will put more pressure on already tight margins.

Citi lowered it's rating on Facebook to "neutral" from "buy," saying it didn't see "any near-term catalysts for the stock." Meanwhile, Jefferies downgraded it to a "hold" on concerns that Facebook's current valuation made the stock too rich, given the trajectory of its expenses.

In turbulent after-market trading on Wednesday, the stock initially tumbled about 10 percent before it recouped most of those losses. Still, the bungee jump continued in pre-market trading on Thursday, which saw Facebook's shares slide by more than three percent.

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