Does Wall Street Hate Facebook?
Facebook just can't seem to get in Wall Street's good graces.
The company reported earnings Thursday that hit analysts' estimates and beat on revenue, but the stock still took a nose dive in after-hours trading, dropping as much as 15 percent. Facebook'sstock was down about 10 percent in afternoon trading.
But, Wall Street's tumultuous relationship started way before Thursday's earnings report. The stock has been in a decline ever since the company went public, pricing at $38 a share.
Why can't Facebook catch a break? Because the company has continually failed at convincing investors that its mobile monetization plan will work. Facebook officials had a chance to woo investors with an improved mobile strategy during the company's conference call Thursday, but they failed, and the stock continues to feel the ripple effect.
"We were looking for a new shiny brass ring, and we didn't get one," Richard Greenfield, an analyst for BTIG, said.
Greenfield said that investors were looking for new or more interesting ways to make money from the mobile platform, but Facebook's Sheryl Sandberg, the chief operating officer, reiterated that sponsored stories are still the "cornerstone" of the social network's monetization strategy on mobile.
"I think the fundamental question here is they are relying on sponsored stories to carry them in mobile, we're not convinced they can," Greenfield said.
One way Facebook may have been able to avoid the pummeling of their stock was to issue financial guidance, which would have helped reassure investors of the company's mobile strategy, Victor Anthony, an analyst for Topeka Capital Markets, said on CNBC's “Squawk on the Street.”
"They need to come out and reassure investors some sort of plan on how they plan to monetize the platform in a significant way over the next several years and the best way to do that is produce some sort of financial guidance," Anthony said. "They have those numbers in-house, they might as well as release them to the Street."
Increased costs because of investments are another reason the company's stock is being pressured, Anthony said.
While the stock may be suffering right now, Anthony said he expects the mobile investments to pay off and predicts the stock will reach $40 by the end of 2013.
"The reaction today is somewhat irrational, so if I was a long-term investor this would be a prime opportunity," Anthony said. "I'm a believer in the platform, I'm a believer in the long-term opportunity on Facebook. I think there is significant potential optionality in the platform."