The stock dropped because is grossly, obscenely, absurdly overpriced. At the high Monday morning, it was 39% above its 50 DMA. I don't think I've ever seen a parabolic move of such magnitude. Most stocks will sell off when only 20% above the 50 DMA. Occasionally a stock will go 25-30% above. 39% is almost beyond the realm of statistical probability. This is a $50-60 stock at best.
By viewing this morning’s headlines, one would infer that Facebook is in deep trouble. “Facebook warns” and Facebook Fizzle?” plastered on the Yahoo Finance pages. You would never know that they just produced a qtr that most companies would die for. To set the record straight, Facebook is about business, or more accurately connecting people with business. It was never about the 7-13 year old demographic. Kids have the attention span of a knat. I should know because I have a 13 year old. If Facebook had to rely on kids for its future, it would be toast.
So the street is upset that Facebook isn’t going to endlessly increase the percentage of ads in its news feed? Well, maybe Facebook actually cares about the user experience, and isn’t willing to destroy that just for the sake of profits. Besides, when you have a captive audience of a billion people, there are virtually an unlimited number of possible revenue streams.
I have never seen so much negativity about one company. Yet companies like Amazon, Netflix, and Tesla have astronomical forward p/e’s of well over 100, and get a consistent pass from the media. Tesla would be losing money if not for government rebates, but not a word about its insane valuation. Hell, J & J is trading at 16x forward earnings with only 7% earnings growth.
Either the critics are complete morons, or they’re trying to manipulate the stock for personal gain.
I would be really shocked by a mammoth upside surprise. I'm expecting .20 or .21 cents. The stock is already trading at over 50x forward earnings, so unless they blow out, I don't see these "$80 by Xmas" predictions. They've already announced no video ads this year, which was supposed to be a major growth driver.