This is an excerpt from an article I originally published on Seeking Alpha on January 22, 2013. Click here to read the entire piece.)
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Seven months later, Facebook has tried to demonstrate that it is actively inventing new ways to keep its users engaged and monetized. For the last two months, the market has finally started buying the message; at least until the announcement of Graph Search on Monday, January 14th. The pullback in the stock for the rest of the week was mild, but it presents a good moment to put FB into perspective as it has churned from $45 to $17.50 and then back to as high as $32.
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Source: FreeStockCharts.com
The change in sentiment is remarkable. From price action in the stock, to analyst upgrades and increased price targets, to options trading, to short interest, FB is a completely different company in just a matter of months.{snip}
Source: NASDAQ FB Short Interest
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The next earnings call should provide another major turning point for the stock. {snip}
Mind you, I am definitely looking forward to Graph Search. I have long wanted the ability to quickly and easily search for content in my profile. However, I have very rarely thought to look through someone else’s profile foraging for material. More importantly, I am certainly not interested in allowing my entire profile to get searched by anyone other than my closest friends and family. {snip}
The promo video for Graph Search contained other notable uses cases, some revealing the shortcoming of the product. {snip} While they have less money to spend, the odds of monetizing seem much higher with the younger demographics. However, note well that dating sites like MeetMe (MEET), Spark Networks (LOV), and FriendFinder Networks Inc. (FFN) get valuations at a fraction of FB’s current valuation as the competition is stiff and the field is extremely crowded.
The biggest weakness in Social Graph comes in mobile. {snip}
Thus, in many ways, the fundamental business of social networking has changed very little since Facebook’s IPO, even as the company continues to churn out new features to convince Wall Street that it has a strong monetization engine. What HAS changed is market sentiment, and the market’s willingness to pay up for the current story. While Facebook’s business pushes onward, I will not be surprised to see Facebook’s stock hit $20 or so at some point this year as the fickle market loses its patience (aka profit-taking) at some key moment.
Be careful out there!
This is an excerpt from an article I originally published on Seeking Alpha on January 22, 2013. Click here to read the entire piece.)
Full disclosure: short FB, long YELP