by Alyssa Oursler | December 20, 2013 5:45 am
Facebook (FB) didn’t exactly roar onto the market like rival Twitter (TWTR), but the social stock created and run by Mark Zuckerberg has posted one hell of a comeback.
For those who forgot, the $38 IPO price set for Facebook stock was more than cut in half during its first few months on the market. And shares of FB stock regained only a little ground to be worth just over $26 when 2012 came to a close — a nearly 30% fall from the initial offering.
But by 2013, Facebook has ramped up its monetization and mobile efforts, and FB stock began taking off as a result. Shares of FB stock have more than doubled since the start of the year, recently hitting an all-time high of just under $56.
Of course, past gains are past gains, and the question now is whether FB stock can keep that climb going heading into 2014 — especially as competition heats up in the social space and many fear that Facebook is losing the “cool factor” it once had.
So, we asked top InvestorPlace contributors if they think Facebook stock is a buy in the new year. And as is the case with the actual Facebook site itself, it seems that most people either love or hate FB stock. Take a look:
By Jeff Reeves
Editor, InvestorPlace.com and The Slant
Facebook (FB) has found new life in 2013, with the social media giant up over 100% year-to-date. But that is too much too fast, given the underlying problems with FB stock.
Facebook admitted in its November earnings call that it was having trouble retaining teen users. This is just one element of the problem FB faces as it hits critical mass. Growth among Facebook users in Western markets has slowed to the low single-digits quarter-over-quarter.
Those Western users in the U.S. and Europe are by far the most lucrative, too. I expect Facebook to show its first quarter-over-quarter decline in users in both its North American segment and its Europe segment this year — and while continued expansion elsewhere and the roll-in of Instagram’s growth may counteract some of that, the additional users from these other segments will undoubtedly be much less profitable than the ones lost in the West.
All this even as Facebook stock still trades for a forward P/E of almost 50.
It’s hard to believe this social media giant will ever lose its dominant status … however, there are very real short-term arguments against FB stock based on current valuation and growth concerns.
If you’re a long-term investor who bought a year ago, there’s reason to hold. But if you’re a short-term trader or considering entering FB at these levels, I would think twice about the risks in this social media stock.
By Dan Burrows
Don’t expect Facebook (FB) to put up a repeat performance in 2014. It’s unusual for any decent-sized stock — much less one with a giant market cap — to double two years in a row. Sure, it could happen to FB stock, but probability is against it.
Consider that this year’s move in Facebook stock more than doubled the market cap to $136.41 billion. For FB stock to double again, it would need to add another $136 billion to hit more than $270 billion in market cap. It’s much, much harder to grow rapidly off a bigger base.
Then there’s the case that Facebook is a momentum stock; it could go cold at any time. The market rewarded FB stock this year for its mobile strategy, but momentum investing is very much a what-have-you-done-for-me-lately game.
That said, it is hard to imagine the market putting up another year of solid gains without Facebook stock participating. Historically, great market years are usually followed by good ones, notes Sam Stovall, chief equity strategist at S&P Capital IQ.
If the S&P 500 rises another, say, 10% in 2014, it’s easy to see Facebook stock outpacing it, if only because it means equities are in favor, and Facebook profits are increasing so much faster than the broader market’s.
No, you can’t expect FB stock to go ballistic again in 2014, but it does still look like a market-beater, and that makes it a buy.
By Tom Taulli
Mark Zuckerberg really should be commended for moving Facebook into mobile. In the latest quarter, mobile represented 49% of overall advertising revenues, up from 41% in Q2. A year ago it was zilch. This major transition was enough for FB stock to stage a nice move in 2013.
Despite this, there are things for Facebook stock fans to be worried about. One is the failure to launch products that users want! A list of some of the duds include Graph Search, Poke (which was a knock-off of SnapChat) and Home (a launcher for Google [GOOG] Android). The fact is that FB is still living off of its timeline; that’s about it.
Another troubling issue is that Facebook appears to be a bore for teens. Instead, they are flocking to apps like WhatsApp, Line and yes, SnapChat. In fact, Zuck’s offer of $3 billion for SnapChat looks like an act of desperation.
Finally, as indicated on the recent quarterly call, FB is close to the limit on how many ads it can place on its platform. In other words, it could get tougher to keep up the revenue momentum, and thus keep Facebook stock climbing.
So in light of the big rally already as well as the problems with teens and ad opportunities, I’d stay away from FB stock for now.
As of this writing, no writers held a position in any of the aforementioned securities.
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