Blog Posts by Jennifer Carinci

All that hype for a 23-cent gain! Facebook's (FB) first day as a publicly traded company started with a bang and ended in a whimper. FB shares opened on the Nasdaq at 11:30am et, after a 30-minute delay, at $42 each; 11% higher from the IPO price of $38. Within 10 minutes, that gain was cut in half and the stock hovered around $40 for most of its shortened trading day, before officially closing at $38.23.

Facebook's Opening Day

While difficult to cut through the hype surrounding this stock, some cautionary signs emerged in just the last two weeks leading up to the IPO. We've discussed them at length here on Breakout. Slowing revenue growth, General Motors (GM) pulling ad spending, and monetizing mobile usage are strong, but not alarming, reasons to question when to buy, how much to buy, and whether this is the right investment for you.

Earlier today Breakout covered the Facebook open live from our New York studio and the Nasdaq market site. In the attached video tech analyst David Garrity of GVA Research

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Facebook (FB) officially becomes a public company today. Shares are just hours away from debuting on the Nasdaq. The social media king made history becoming the largest U.S. internet IPO ever. Yesterday afternoon the company sold 421.2 million shares priced at $38 each, giving the company a $104 billion valuation.

More important than today's event, is how Facebook transitions then evolves as a public company. Five years ago, valuing Facebook above $100B would seem absurd. Remember 2006? Yahoo (YHOO) almost scooped up the company for a mere $1 billion. One tech-savvy, deep-thinker was way ahead of the curve on calling for Facebook's rise above $100B: James Altucher, managing director of Formula Capital.

"I really think Facebook is like a microcosm of the entire Internet. It's not just a website… If they were to just sit on their hands and go public, I think you could start seeing Google-like numbers in the revenues, in the EBITDA, and in the valuation. So if Google is at a $150 billion market cap, eventually Facebook is going to hit that if it were to go public and stay through it the long haul."

-James Altucher on CNBC, July 25, 2007

Not a bad vision to have five years ago. Of course, seeing clearly in hindsight does nothing to make you money. On a day when every investor is at least entertaining the idea of buying FB shares, Breakout invited Altucher on to discuss what the next five years hold for Facebook.

"I think five years from now, and it's hard to predict 2017, but let's say they have $10 billion in earnings, it's not unreasonable for them [Facebook] to have a $300 billion market cap," he predicts.

Target (TGT) nailed a trifecta with surprisingly strong first-quarter earnings results released this morning. The big box retailer reported EPS of $1.11 a share (ex-items) versus the $1.04 consensus estimate. Revenues came in at $16.87 billion versus $16.85 billion estimated. And the company raised full-year 2012 guidance by 5 cents to $4.60 to $4.80.

"They hit the bullseye on these earnings," says James Altucher, managing director at Formula Capital. "'They're hitting the low-end and the high-end (consumer) at the same time."

Altucher says Target is reigning in buyers of all sorts by offering widespread discounts, exclusive products, and implementing a clever way to compete with online retail dominated by Amazon (AMZN).

"Companies are making products specifically for Target so you can't go on and buy them online," he explains. "So Target is effectively having an online strategy by targeting off-line."

Altucher sees any company tied to the economy as a benefactor of underlying improvements, namely Wal-Mart (WMT).

Our nation's largest retailer reports results Thursday morning before the opening bell and analysts are expecting single-digit growth in their year-over-year numbers with EPS of $1.04 and revenue of $110.5 billion.

The roadshow ahead of the largest technology IPO in history officially gets underway today in New York. Facebook executives will meet with investment banks, large money management firms and private investors to generate money and drum up hype leading to their expected initial public offering on May 18^th. The social media king —which will list under ticker symbol (FB)— is targeting a share price range from $28 to $35 a piece, giving the company an implied valuation between $77 billion to $96 billion.

The question facing investors large and small is whether the high valuation will pay off after the hype settles down.

Last month Facebook filed their first public quarterly earnings report, showing a dip in sales and profit. Total revenues came in light at $1.06 billion for the first-quarter versus $1.3 billion in Q4. For IPO watchers like Francis Gaskins of IPODesktop.com, these numbers are a flashing warning sign.

"What a lot of people don't realize is they missed their (earnings) estimates," he states, also pointing out that 2011's total revenue of $3.7 billion was significantly weaker than the $4.3 billion estimate.

"There's no growth there right now based on the numbers. They're basically trying to reinvent themselves, saying 'trust me' they can monetize their 901 million users," says Gaskins. "But they don't really have a track record of success with their new endeavors."

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The Dow Jones Industrial Average and the S&P 500 snapped a two-week losing streak, but the Nasdaq closed in negative territory for a third straight week weighed down by Apple (AAPL). It was a choppy five sessions dominated by bank and big tech earnings, mixed economic data, and fears of out-of-control Spanish bond yields. A string of market-moving events next week will offer critical insight into the state of the economy, here and abroad, and where the market is heading next.

France's Presidential Election on Sunday

France is the second-largest economy in the Eurozone, and the fifth-largest in the world. With 10% unemployment and an expected 0.5% growth rate, this Sunday's French presidential election could have major consequences for the Eurozone.

"That's going to cause a lot of issues in the market," says David Lutz, managing director at Stifel Nicolaus. "If a Sarkozy loss occurs, that could complicate a lot of the bailout packages for the Eurozone. It could complicate austerity packages, and we're starting to see some of this stress building up in the market."

Right now it's a 10-person field of contenders that the French will vote on over the weekend. It's expected to be narrowed down to incumbent Nicolas Sarkozy against Socialist party challenger Francois Hollande, who will square off in a deciding vote on May 6.

As critical bank earnings keep rolling in, there's been some confusion beneath the headlines. If a bank simply beats earnings estimates, does it warrant a pop in share prices?

This is the reaction we're seeing this morning with Bank of America's (BAC) and Morgan Stanley's (MS) earnings beats. But earlier in the week J.P. Morgan (JPM), Wells Fargo (WFC), and Goldman Sachs (GS) topped expectations, yet traded lower.

All of these big banks, including U.S. Bancorp (USB), reported higher-than-expected revenue growth, while Citigroup's (C) remained flat. While this seems positive, you need to understand what's behind the numbers. As The Wall Street Journal pointed out after JPM and WFC reports, the banks topped revenue estimates mostly because they scaled down future loan loss coverage.

Nonetheless, some degree of confidence has pushed bank stocks to lead the 2012 rally. The Financial Sector SPDR (XLF) is up 18% year-to-date versus the S&P 500's 10% rise.

"The (bank) earnings justify the move that we've seen so far," says Jack Ablin, chief investment officer at Harris Private Bank. "I think we're able to hold the values that we've got. So now the question is looking forward: 'Are the favorable trends going to continue?'"

Senate Democrats are set to bring legislation on the Buffett Rule to a vote this Monday. Why now? For starters, it's just ahead of tax day in America, meaning the media will find the vote irresistible. More importantly, with Mitt Romney the presumptive Republican nominee, the game is afoot for the Presidential election. Taking a thinly veiled pot-shot at Romney's wealth will make for a nice opening salvo from the Democrats.

"It's the beginning of the political process and the Democrats and the Administration are putting their cards on class warfare, the politics of envy," says Hank Smith, chief investment officer at Haverford Trust. "They're going to play that out right into November."

If passed, the Buffett Rule —named after billionaire Warren Buffett, chairman & CEO of Berkshire Hathaway (BRK-A) and one of the wealthiest men on earth- would ensure that individuals and businesses earning over $1 million per year pay at least a 30 percent effective income tax rate. According to Congress' Joint Committee on Taxation, the measure would raise $47 billion over 10 years. For perspective, the incremental tax revenue is equivalent t0 0.5% of the current $1.2 trillion deficit.

From an economic perspective, the Buffett tax amounts to little more than political pandering of the highest order. It's the collective impact of all the pending tax hikes that pose the real threat to the economy, according to Smith.

"They call it the fiscal cliff in 2013. That can't be good for the markets because if all those tax increases are enacted simultaneously, you'll take out at least 2% of GDP growth right away," he states.

Selling pressure remains today as investors ride out the shortened market week and punt on the economy until after the March Jobs report.

Tomorrow's release of the jobs report comes at 8:30am eastern time, while the U.S. stock market is closed for Good Friday. Consensus estimates predict the unemployment rate holds steady at 8.3% and nonfarm payrolls rise 203,000.

"Given the fact that we've seen a sell-off the last couple of days, investors are going into the weekend holding their breath in anticipation of a number that comes in a little lighter than that (consensus)," says Mark Luschini, chief investment strategist at Janney Montgomery Scott.

Luschini points to this week's other jobs data for insight on the monthly report. Earlier today, weekly jobless claims showed a modest decline of 6,000 to 357,000 and pushed the 4-week average down to 361,750 — the lowest level since April 2008. Also, ADP data released on Wednesday showed the private sector added a stable 209,000 jobs in March, and an upwardly revised 230,000 in February.

If the March jobs report does disappoint, Luschini says "it may play into recent concerns of slowing economic data, particularly as risks have elevated in Europe. And that could impair equity markets Monday morning."