Facebook's price bounced 20%+ between earnings announcement yesterday and the posting of this article. Curiously enough, the stock bounced to within a mere SEVENTY CENTS of our mutliple's based valuation target the day after earnings. I feel some love is in order here, for that was damn good call! Subscribers, please reference the FB IPO Analysis & Valuation Note - update with per share valuation [4] released exactly 5 months ago on 05/21/2012 (click here to subscribe [5]). Just to remember where we came from (I'm just using the time period where it was possible to short or buy puts on the stock, to keep things real)....
As for keeping it real:
MOBILE GROWTH: Roughly 14 percent of its ad revenue came from mobile advertising, up from somewhere around zero. This is to be expected, but since we don't have any real baselines or history to compare this to, it truly means nothing other than Facebook has and can make SOME money from mobile. The query du jour is how much, and when, no?
THE NUMBERS: Facebook Inc. posted a loss of $59 million, or 2 cents per share, in the July-September period. Adjusted earnings of 12 cents per share were a penny better than expected. Revenue rose 32 percent to $1.26 billion. That's also higher than the $1.23 billion Wall Street was looking for.
All should still be aware of the primary factor in this "growth company" stock's story....
These facts should not have been a surprise, and blog subscribers were made aware nearly a year ago, as excerpted from our 2nd most recent forensic analysis.
As excerpted from Facebook's earnings press release: Payments and other fees revenue for the third quarter was $176 million, a 13% increase over the same quarter in the prior year and a 9% decline sequentially from the second quarter of 2012. So, where did that drop likely come from? Well reference the part about Zynga below, warned roughly 7 months before the fact!
As excerpted from BoomBustBlog Challenges Face Ripping Facebook Share Peddlers That Left Muppets Faceless And Nearly 50% Poorer After IPO [6]:
I made it clear that those who lost roughly half of their capital at or near the IPO price simply forfeited those funds from not readign BoomBustBlog, and this sitaution was virtually guaranteed. I felt so strongly about it that I made much of my opinion available for free this time.
Here's where I broke it down on Capital Account
I also happened to do the same on the Max Kesier show...
Subscribers who haven't refreshed their viewing of our Facebook research should do so now - (subscription [7] only) FaceBook IPO & Valuation Note Update [8]. Pro and instititional subscribers are welcome to peruse the downloadable Facebook Valuation Model [9], allowing you to input your own assumptions in the very unlikely event you may not agree 180% with me :-)
And from the archives...
Facebook Finally Faces The Fact Of BoomBustBlog Analsysis [10]
I discussed Facebook on the Peter Schiff radio show [11], the Facebook excerpt is below...
From my previous Facebook analysis public excerpt:
Yeah, I was on a roll last year, wasn't I? That's not the gist of it either, as we reminisce even more...
Here is an excerpt for those who do subscribe to our research and services, YET!
[12]
Even
with the fund taking 45%+ losses and the LP (limited partners, ex.
Goldman's clients) losing every last single dime, Goldman easily pulls a
33% return. God forbid Facebook share actually do well, Goldman's
numbers look... Well... Damn near illegal! Almost as if they can pump up
a price without any fundamental justification or public disclosure of
financials and still sell it retail to the public. Of course, such a
thing could and would never occur - not with the every vigilant SEC to
take our backs. Excuse me while a cough a up a lung from laughter...
[13]
You
see, this is the dirty little secret of private equity funds. They are
not in the business of investing money for client's maximum risk
adjusted return. They are in the business of collecting fees. Those poor
innocent (or not so, particularly when they are investing their clients
monies, hence are in the same business) souls that actually believe as
the commenter above quoted "Wow!!! If Goldman is putting their money in
this, it must be serious!"simply the lamb being led to the private
equity/IPO slaughterhouse. You see, there is no loss to GS - no matter
how high they bid up the valuation nor how hard it comes crashing down.
This gives them the incentive to shoot for the sky with the private
equity deal, because when the IPO breaks, its bonuses bigger than nearly
any have ever seen. Facebook makes and excellent marketing story as
well. Boy Wunderkind CEO, a product nearly everyone uses and loves, and a
mysterious dearth of business model to give it a mystical effect.
Don't forget the involvement of the "cream of the crop" of Wall Street
banks, whose bankers, traders and analysts are all so much smarter than
us guys from Brooklyn. Add this up, and you get "Wow!!! If Goldman is
putting their money in this, it must be serious!".
Additional Facebook analysis, valuationa and commentary.
On Max Keiser, go to the 13:55 marker for more on Facebook...