Friday’s Must-Read Articles: Is Facebook Over? Twitter’s Route to Maturity, Can We Expect an IPO Soon?
TGIF everyone, we hope you had a great week and are excited for the weekend to finally be. Below we have a great list of articles. So sit back, relax, and enjoy the articles below. Like always, if you have any investment questions or need advice on a specific stock, Stocks on Wall Street is always here for you so feel free to Contact Us at anytime. We always love to hear from our readers so please shoot us an email. Also let us know what you think about the articles below and your thoughts on the market’s current climate by either commenting below, posting on our Facebook Fan Page or by sending us either Stocks on Wall Street or our Founder a Tweet.
Is Facebook Over? (Salon)
Twitter’s Route to Maturity, Can We Expect an IPO Soon? (WSJ)
Credit Suisse Global Investment Returns Yearbook 2013 (CS PDF)
Why Do People Hate Rising Stock Prices? (Pragmatic Capitalism)
100 Startling Facts About the Economy (The Motley Fool)
Mr. Buffett on the Stock Market circa 1999 (Fortune)
E-Mails Imply JPM Knew Some Mortgage Deals Were Bad (DealBook)
How to Get an “Iffy” loan approved at JPM Chase (TBP)
Understanding Apple Requires an Analysis of Fundamentals and Psychology (Institutional Investor)
iTunes Store Sets New Record with 25 Billion Songs Sold (Apple)
The Next Secular Bull Market Is Still A Few Years Away (Street Talk Live)
Insiders now aggressively bearish (MarketWatch)
Money Changes Everything (NYT)
Establishing Your Top 10 Investment Default Settings (Above the Market)
Yesterday we asked the most popular question, “Will We Ever See a Twitter IPO?” Well thanks to Fox Business Network’s Charlie Gasparino we have more insight on the situation and he reports that Twitter’s IPO is at least a year away.
That’s the explanation recently delivered by Facebook (NASDAQ: FB) chief operating officer Sheryl Sandberg to at least one prominent institutional investor about how the social media network so badly misjudged investor demand and flubbed its much-hyped initial public offering in May.
Shares of Facebook have declined more than 50% from its IPO high, and company officials have recently launched a charm offensive with large institutional investors to try and entice them back into the stock amid growing market discontent about the company’s future prospects, and the ability of management, particularly the company’s 20-something CEO Mark Zuckerberg, to deliver future earnings growth.
The flubbed deal has had far-reaching implications, making already skittish small investors even more hesitant to jump into the stock market.
In addition, FOX Business has learned that Facebook competitor Twitter is reevaluating the timing for a possible IPO following Facebook’s problems. A person with knowledge of Twitter’s plans says any IPO could be a year away, as senior management determines how best to deliver earnings as a public company. Company founder Jack Dorsey is working with JPMorgan (JPM) CEO Jamie Dimon on Twitter’s future, this person says.
Sandberg, 42, has been widely regarded on Wall Street as Facebook’s “adult in the room” largely for the decade she spent as a senior executive at tech giant Google. But some of her recent remarks about Facebook’s ill-fated IPO have large investors and Wall Street analysts questioning her abilities as well.
Sandberg told a large institutional investor at one recent meeting that the firm decided to price the IPO at $38 a share—in what underwriters believed at the time was a steep price—not just to get the most possible money out of the deal, but also to avoid Wall Street traders from “flipping” the stock, meaning they would buy shares at the opening price and sell them sometime later at a profit when shares start to rise amid additional investor demand.
Sandberg said the company was seeking long-term investors who believe in Facebook’s future, this person said.
But when the investor questioned her on why the company allowed insiders and venture capitalist financiers to immediately trade out of the stock, she explained that was part of Facebook’s “culture,” according to one person with direct knowledge of the conversation.
“Sandberg basically said that Facebook is a Silicon Valley company that doesn’t want to make Wall Street traders rich, but has no problem making the people in Silicon Valley wealthy,” this person said.
Recently, Facebook has faced criticism for allowing venture capitalists, such as early Facebook backer Peter Thiel to sell nearly his entire stake just a few months after the IPO. Other companies demand that investors abide by far longer “lock up period” where they have to hold onto shares for a longer period of time.
Through a spokesman, Sandberg had no comment.
One of the problems with Sandberg’s explanation is that the firm and its underwriters at Morgan Stanley misjudged the appetite for shares among institutional investors who would normally hold the stock. Many institutional investors balked at the initial pricing, which is why underwriters pushed so many small investors into the deal.
Meanwhile, Wall Street traders still enjoyed a decent payday on the IPO when it spiked from its $38 IPO price to $45 in initial trading. Many sophisticated traders sold the stock when it hit around $40 a share.
Many small “retail” investors, however, bought the stock when it was near its highs. Unlike large institutions, these investors were not briefed about the company’s projections of deteriorating revenue and profit growth in the days prior to the IPO.
Small investors also experienced more difficulty buying shares and selling shares because of a technology glitch on the Nasdaq stock market, where the IPO was sold.
“Flipping a stock that goes up is just part of the business,” said Michael Pachter an analyst at Wedbush Securities. Pachter said the stock is down for the simple reason that Zuckerberg, Sandberg and senior Facebook management “just misjudged demand.”
Twitter is the new cool thing. The social media service is blowing up as trending has become the new cool thing. Twitter’s easily surpassing Facebook in popularity and has been more successful in generating profit from mobile devices, which everyone agrees is the future for online social media services. In fact, Twitter out earns Facebook 3-1 on mobile devices which leads many people to expect that Twitter will be more successful down the road than Facebook who we all know is having their own problems after the IPO crisis. Nevertheless, this has brought up an interesting question surrounding the much popular social media service, Twitter. Will they potentially ever have an IPO or do they not want to make the same mistakes Facebook did? As a result, this prompted us to raise the question on our Facebook Fan Page:
Stocks on Wall Street’s Question of the Day Is:
So far the results are: 70% Yes 30% No
We would love to hear your answers, simply follow the link below & go to Stocks on Wall Street’s Facebook Fan Page to vote! Also weigh in by sending us a Tweet, commenting on our Facebook Fan Page discussion, or by leaving a comment below!
Historically it has been often told that fall is always a great time for technology stocks to reap the big gains investors love to see. When comparing to Silicon Valley’s top social media plays however this theory has far been true. Except for LinkedIn (NYSE: LNKD) and Yelp (NYSE: YELP) who are up 197% and 152% respectively the rest of the group is performing sub-par to say the least, as you can see in the chart below.
The Four Struggling Silicon Valley Social Media Plays
Facebook (NASDAQ: FB) has been the big headliner since the beginning being one of the biggest disappointments of all-time, as despite having now 1 billion users the stock has fallen flat ever since the IPO, down 45% so far.
Groupon (NASDAQ: GRPN) the online coupon website started off strong but have seen their best days behind them as they have struggled recently down 77%.
Pandora (NYSE: P) the popular free online music website who due to huge licensing fees has struggled as well down 41%.
What the future holds for all these companies is still up in the air but as of right now the four on the bottom need to seriously reanalyze their companies from top to bottom and start following in line with LinkedIn and Yelp and ask them what they’re doing so they can get back on track or else they might just disappear forever.
Silicon Valley’s Stock Funk
Anyone who follows Stocks on Wall Street knows that since the IPO we been a bear about Facebook and it’s long-term outlook advising investors to stay away. Now we’re not alone as in Barron’s controversial recent Cover Story they downgraded Facebook (NASDAQ: FB) significantly saying the company is worth $15 per share meaning that they project the stock to fall another $6.79 or a 43%. This cover story alone hit Facebook hard as investors have become cold feet in the stock once again as shares fell 9% today much can be attributed to the negative attention brought to the company by this cover story.
Our disdain for Facebook’s valuation is no longer an outlier perspective. When the cover of Barron’s values Facebook at $15 per share it means that there are significant troubles with the company’s current business/revenue model along with poor long-term outlook. This has been one of the most controversial stocks of 2012 as investors are often split on declaring what is the bottom for Facebook with optimistic investors thinking that shares are cheap right now and in the long-term will pay off. Clearly Barron’s doesn’t believe we have come near the bottom hence the cover story they published today. Expect shares to continue to decline as investors lose confidence in the stock. We would recommend you stay far away from Facebook as it’s a risky play and we side with Barron’s in the fact that we think shares still have a far ways to fall.
To read Barron’s article click on the link: Facebook is Worth $15
Above is an interesting table courtesy of Barry Riholtz and the Washington Post along with two great articles: Facebook’s IPO: What it Means to You and Less Than Meets the Eye at Facebook. Plus below are Stocks on Wall Street’s past articles on Facebook:
Mark Zuckenburg says he can revolutionize the way Facebook is used on hand held devices and monetize it effectively but he has yet to do so, only time will tell. In the meantime, we have a great info-graphic for you below called Mobile Money: Facebook Advertising!
While Western Social Media Stocks continue to crumble, struggling to meet investor expectations their biggest peer in China is performing quite the opposite, thriving and continuing to soar higher. Facebook (NASDAQ: FB), Groupon (NASDAQ: GRPN), and Zynga (NASDAQ: ZNGA) all have hit rock bottom in 2012, failing to live up to the hype surrounding them before they went public. On the other hand, Tencent (0700.HK), China’s leading internet company and one of Stocks on Wall Street’s top performing stocks in 2012 is setting new all-time highs! Tencent Holdings recently reported strong second-quarter profits, up 32% overall as the company benefited greatly from their increasing popularity and effectiveness to draw more advertisers to their social-networking websites and their rapidly expanding online gaming platforms. Tencent has been one of the great surprises in 2012, up 55% year-to-date and we expect these numbers to keep on growing as the company has continued to show healthy growth even while the Chinese economy softens and other social media stocks struggle.
The first thing that jumps to everyone’s mind when talking about Tencent is what U.S. counterpart does it compare to? Frankly, no one and why should it, Tencent’s better than everyone else. No European or U.S. Tech Company even comes close to the size of Tencent nor does any company offer the services that Tencent does. If you really must find a comparison then here it is. Combine the forces of Yahoo, Google, Facebook, Twitter, and Zynga all in one. What do you have? A close resemblance of Tencent but still not perfect. If asked to describe the company in a nutshell, well here it is. Tencent is a hodgepodge of all the top online companies encompassing the likes of social media, online gaming, mobile internet, and various other online services you use on a daily base catered to the one billion users they currently have. Impressed yet? Tencent is one of a kind, no U.S. or Europe company even stands anywhere in comparison. They’re an Internet conglomerate, a monopoly of the Chinese online world as they dominate many key sectors offering an array of great services. Originally founded in 1998, Tencent first gained an online presence thanks in part to their instant-messaging platform. Since then they have developed many different successful services encompassing all parts of the online world drawing close to a billion users driving their high volume traffic to all the various segments of the company whether it’s social media, online gaming, mobile internet services, you name it.
It makes perfect sense, China is the world’s largest online market for business so it’s only right that they have Tencent, the world’s largest Internet based company, home to roughly a quarter of the world’s online users. China’s online world is dominated solely by Chinese based companies thanks in part to the strict regulations set in place by the government as they restrict U.S. or European based companies from gaining any online presence. Google, Facebook, Yahoo have all been shut out of the world’s largest online market, making Tencent the biggest benefactor to the strict government policies set in place by the People’s Republic of China.
The amazing part is while Facebook, Zynga, Groupon and many other social media stocks have continued to struggle as of late with many of them hitting 52-Week lows, Tencent has done the complete opposite. That’s right, a complete 180 degrees as just last week they set new 52-Week Highs surpassing $250 per share. So what exactly makes Tencent stand out? What gives them their competitive edge? It’s Tencent’s vast array and blend of services that has ultimately been their secret piece to the puzzle. The great combination of being able to offer everything an online user could possibly need from just one source. The great success all starts with their thriving, profitable online gaming department that is a revenue machine and a key factor to all their success. It has led Tencent’s resurgence allowing them to push through what has been sluggish times for advertisement demand, allowing them to take risks and launch new successful services propelling the company to strong robust growth and increasing revenues quarter after quarter.
Tencent’s gaming division has been all the talk and well deservedly so as it accounted for more than half of Tencent’s total revenue in the first half of 2012. The online gaming options they offer are limitless. Massive online role-playing and first person shooters are the biggest hits but even casual games are vastly popular to the billion worldwide users. The gaming options go a lot deeper offering virtually anything an online gamer could ever desire. Tencent’s online gaming services have thrived in 2012 and soared to all-time highs propelling the company to follow in a similar pattern. While the Chinese economy might be experiencing some kind of slowdown, don’t count on Tencent following any similar pattern or feeling similar effects. In fact after the most recent news and alliance all past records should be thrown out as shortly new ones will be set. What could possibly be next? How could you improve something that’s near perfect? Well it starts with three letters, COD! Ok don’t get it, lets make it simpler. Ever heard of a game called Call of Duty? It’s just a successful online gaming franchise that’s sold well over 100 million copies worldwide, currently has over 40 million active paying monthly online users who clearly have no lives as together they have totaled close to 2 billion hours of online gameplay. Well sounds like the perfect match and that’s just what Tencent and Activision, Call of Duty’s creator, were thinking when they teamed up with the goal of bringing the epically popular online gaming franchise, Call of Duty to China. This deal is a goldmine for both companies and the potential is so lucrative it’s scary to think how strong Tencent’s Online Gaming Department could grow. It’s like putting the previous online gaming services on steroids.
The fact is while the online gaming department will continue to be a cash cow bringing in record profits they won’t even be the greatest benefactors from it all. Nope, the biggest winners will be Tencent’s other successful online services. The social media, mobile internet, various other successful services will be the ones to benefit most. Why might you ask? Well while Tencent’s gaming department will bring in all the money continuing to grow enormously year by year it will only further allow Tencent to invest and create many new successful online services while continuing to grow and develop their already well-established ones. Steady gaming revenue has allowed Tencent to continue to invest in many different sectors creating strong future growth opportunities to carry the business further even if gaming were to ever slow down, something most analysts find hard to ever imagine. Tencent is privileged with being in the driver’s seat during times that few companies are. Allowing them to take chances and make plays many other companies don’t have the luxury to ever embark on is an enormous growth opportunity. It can be these new services they test and develop that could be the next online gaming department or maybe just the next QQ. What’s QQ you might ask? It’s the Chinese version of Facebook, just more popular with more members and without Mark Zuckenburg and his falling stock price. And for those of you who were wondering, yes Tencent also owns QQ, just another perfect example of how many different successful online services the company already currently holds.
If you are interested in finding out more about QQ, simply click on the link to read Stocks on Wall Street’s previous article: The World’s Biggest Social Network: QQ, China’s Facebook but Bigger
They have the whole nation of China in the palm of their hand, growth opportunities galore, a perfect combination for a growing online empire. Tencent has been one of Stocks on Wall Street’s top performing stocks picks and a big winner for many of our readers who have invested in the stock since we first recommended it as a great buy opportunity and future investment on June 17th, 2010 in our article: Picks for 3 International Markets to Watch: Brazil, India & China
Since that date, Tencent has been a big winner for all of Stocks on Wall Street’s loyal readers and followers who invested in the stock. Why? Because in a little over two years the stock is just 3% away from being what Peter Lynch calls a ‘Ten Bagger’! Back on June 17th, 2010 the date of when we first recommended the stock, Tencent was trading at around $127 per share. Today August 21st, 2012 before the markets opened Tencent is trading at $246.40. You don’t even need a calculator to already know that’s a great ROI but for those who like to be precise the total net yield is 97.12% in a little over a two-year span. That’s what we call a great investment and further proof on why you should always invest in best of breed companies that are strong from top to bottom. Just look at the trajectory in the chart below to see the great growth we have all witnessed:
Since the first day we mentioned Tencent as a buy the stock has been on a roll, soaring higher and quickly becoming a regularly talked about stock on our site. We’ve written many articles about Tencent whether they were our own investment analysis, regular updates, answers to questions from fans and readers you name it but I can tell you there were many times we wrote about this stock and for good reason, 97.12% total gain in 25 months! This is where we would like to say a big thanks to all our loyal readers and fans. You guys are the whole reason we exist and Tencent is a perfect example of what we love to do here at Stocks on Wall Street, find great investments and make you money. It’s a simple winning philosophy that we wish to continue to do everyday. Wish to read more insight into all our past collection of Tencent related articles published on our site, well help yourself they’re all below for you to enjoy:
The most recent article we published about Tencent came just last month when we were praising Tencent the run it had just made. Two year’s of epic performance assisted by excellent business decisions putting the company in a great position to be successful for many years to come: Tencent Holdings: The World’s Biggest Social Network & One of 2012′s Top 1st Half Performers
Our Long-Term Take: If you are a current shareholder, what’s not to like? Enjoy this moment and spend your profits wisely. As for Tencent we believe all signs are still pointing in the right direction for the stock to continue to prosper and grow in the future. Long-term we have nothing but great expectations for the stock as we expect the company to continue to grow from strength to strength.
After weeks of getting pummeled and laughed at Facebook (NASDAQ: FB) is finally making a strong comeback. Despite the botched IPO, the Morgan Stanley (NYSE: MS) insider information scandal and the NASDAQ’s technological mixups, shares are finally on a roll and making a strong turnaround. That’s right, Facebook is finally doing what many had originally anticipated, rising close to 25% in a 3-week span trading up from $25.89 to $32.23.
Facebook stock has partly rallied on strong overall analyst coverage boosting investor confidence. Last friday shares soared 4.2% as Nomura Holdings rated the stock a ‘Buy’ projecting shares could rise as high as $40 per share. What was their reasoning?
[The analysts] believe that Facebook’s (FB) industry-leading reach, engaged user base, and comprehensive user dataset will enable the company to continue to grow…. Uncertainties exist around FB’s ability to improve monetization; however, our analysis of strategies to improve results underscores the favorable risk/reward at current levels and the optionality for substantial long-term earnings upside as FB continues developing its still-young monetization model.
Basically that’s a long-winded, jargon-filled way of saying that even though they have no clue on how Facebook will increase revenues, they think there’s a strong chance the company will succeed at doing so. Nomura’s analysts are not the only ones who are high on Facebook.
Of the 10 analysts currently covering Facebook, 7 rate the company as a Buy and 3 are currently Neutral and among the group their average Price Target is $39 per share. The analysts price targets range all over the board, J.P. Morgan holds the highest Price Target of $45 despite holding a current rating of Overweight while Credit Suisse is currently Neutral pegging Facebook at $34 per share. Checkout the chart below to see the full list of the analysts breakdown:
7 Buys, 3 Neutrals
Average Price Target = $39
Bank of America/Merrill – Neutral – $38 PT
Goldman Sachs – Buy – $42 PT
Oppenheimer – Outperform – $41 PT
J.P. Morgan – Overweight – $45 PT
Piper Jaffray – Overweight – $41 PT
Wells Fargo – Outperform – $37-$40 Range
Credit Suisse – Neutral – $34 PT
Citigroup – Neutral – $35 PT
Nomura Holdings – Buy – $40 PT
Morgan Stanley – Overweight – $38
While in the long-run the majority of the analysts are still behind Facebook and its future success there are still many skeptics out there who are still split over what Facebook will do in the near future. Shares fell as much as 3% today based upon that uncertainty as some analysts are still split on the verdict. An interesting note is that analysts with Facebook’s underwriting banks are markedly less bullish about its second-quarter results than other analysts who have rated the stock. Do they know something the rest of us don’t know? Will this do anything to halt the rally, who knows?
In the meantime, I think investors should watch and see where Facebook goes and wait to uncover a few more answers to the many unanswered questions still left revolving around the company. If there is one thing, this recent rally has investors excited once again. The happiest shareholder has to be CEO & Founder, Mark Zuckenburg who’s earned $2,817,480,000 from the stock’s recent rally.
(Find out where Mark Zuckenburg ranks on Forbes Magazine’s Top 25 Richest People in America and Forbes Magazine’s Top 25 Most Powerful People in the World.)
Even after selling 30.2 million shares during the IPO, Zuckenburg still is the largest shareholder owning 443 million shares along with 60 million unexercised options. With all that potential there comes many risks though as some people aren’t as bullish as the analysts above, read Facebook Will Disappear by 2020 to find out more.
So what do you think of Facebook’s long-term projections? Do you side with the analysts bullish expectations or are you still bearish thinking Facebook will fail to generate the revenue numbers to keep the company alive in the long-run?
Read The Wall Street Journal’s Full Article By Simply Clicking on the Link: Will Facebook Really Create 1,000 Millionaires?
Facebook’s IPO has set new records for wealth hyperbole.
It’s the “best investment ever!” It’s the biggest liquidity event ever! It’s about to unleash a new wealth wave in America! It’s a boon to wealth managers and Palo Alto realtors. It’s going to solve California’s budget problems, help fix our education system and feed the poor in Africa.
But the most widely repeated superlative about the Facebook IPO is that it will create “1,000 overnight millionaires.”
This is impossible to know, of course. But the phrase “1,000 millionaires” appears to have magical – if not factual — significance in Silicon Valley.
Tech IPO watchers might recall Google’s IPO in 2004. Press reports at the time said the IPO “created more than 1,000 paper millionaires,” including a chef and a masseuse. That statistic was often attributed to “estimates,” though it was never clear where those estimates came from.
With Facebook, the “1,000 millionaire” claim first showed up in a Reuters article in December. Reuters partly attributes the number to a former in-house recruiter for Facebook who says “there will be thousands of millionaires.” The thousand claim has been picked up around the world and used as gospel in many recent reports about the IPO.
If the 1,000 number is true, then every one of the company’s 700 employees as of the end of 2008, as well as hundreds of other employees and investors, have shares worth at least $1 million or more.
Reuters concedes that there is no precise data on how many shares are owned by how many employees. It notes that most of the gains will go to the co-founders and the big venture-capital investors. Reuters said that in 2009, an engineer with 15 years experience hired by Facebook could get options to buy 65,000 shares at $6 a share. After the 5-1 stock split in 2010, those shares would be worth $12 million at the expected valuation of $40 a share.
That was 2009, of course. And it was for a 15-year engineer. Press reports say Facebook has become far more stingy with stock in recent years. Managers hired last year were getting as little as 2,000 shares – giving them paper wealth of a measly $80,000.
What’s more, many of the paper millionaires won’t be able to do anything with that paper wealth until the middle of next year, when they can actually sell the stock. Until then, it’s just paper. And Facebook’s share price may or may not be worth $40 by the middle of 2013 (ask the Groupon guys).
Facebook will no doubt create a large amount of wealth for a single company. Employee-wise, it’s a small company. And its IPO is far from a “wave of wealth.” Even if it creates 3,000 new millionaires, those new millionaires would represent less than 0.5% of the millionaires in California alone.
More like a splash than a “wave.”
How many millionaires do you think Facebook will create?
Read The Wall Street Journal’s Full Article By Simply Clicking on the Link: Will Facebook Really Create 1,000 Millionaires?
The pre-IPO build up wasn’t enough, Facebook continues to dominate the financial headlines & newswaves however it’s not good news. In fact, it’s hard to find many analysts out there who are optimistic about Facebook at all.
Bloomberg calls Facebook the “the worst-performing large initial public offering during the past decade” losing more than 25% in the 10 days since the IPO.
SmartMoney recently downgraded the stock and said a safe, fair price to pay for shares of FB is $15. $15? That’s a long way from the original IPO-issue price of $38.
In fact, everyone is downgrading the social media giant as investors have already lost huge amounts of money. Hopefully none of you listened to Mad Money host, Jim Cramer, who heavily promoted Facebook pre-IPO and urged investors to purchase as many shares they could get their hands on. To learn more about Jim Cramer’s Flip Flopping read our article “Jim Cramer Flip Flops Again, This Time De-Friending Facebook After Urging Investors it Was a Great Buy!”
The ongoing decline in Facebook’s stock goes a lot further than the private market’s valuation and the NASDAQ’s failures. Analysts don’t know how to put a value on this stock as some are wildly optimistic and clinically insane where others are pessimistic coming out with all the doomsday possibilities. I’m sure investors aren’t too happy either with the sharp decline of Facebook’s shares. The problem? Facebook the stock is a lot different from Facebook the company and lots of investors haven’t figured that out. The hype outweighed the company’s worth.
After originally opening at $38 and quickly rising to above $42, FB shares have sharply fallen to $28.48 a total decline of 25%. That means Mark Zuckenburg has lost close to $6 billion already and if SmartMoney’s right and shares of Facebook do fall to $15 he will have lost close to $13 billion more than 60% of his total fortune. That’s the problem with paper money, none of it’s real until you cash out but for Zuckenburg that would mean giving up control of Facebook something we all know he has no plans on doing so. To get a picture of how bad Facebook’s stock has actually performed just checkout the trajectory in the chart below.
So for all you tech-enthusiasts and social media experts stay on the sideline for this one, Stocks on Wall Street still doesn’t think it’s a good time to jump into Facebook as we believe shares will continue to decline and with all the controversy and uncertainty we believe there are just so many other better investments to put your money into. Nevertheless, keep an eye on FB, if anything it’s just fun to watch the stock fall.
Building off of our first post earlier today where we gave you picks 6-10 in our article ‘10 Stocks Poised to Prosper From Facebook’s IPO: 6-10‘, here is the second part to that list with the Top 5 Stocks that I believe will benefit from Facebook’s IPO & what I like to call the Facebook Trickle Down Effect!
10 Stocks Poised to Prosper From Facebook’s IPO: 1-5
1. Microsoft (NASDAQ: MSFT) - I don’t think I need to explain what this company does but many of you might be wondering what connection do they have with Facebook? Well after many attempts to become a player in the social networking sector nothing quite has worked out for Microsoft, as a result CEO Steve Ballmer decided to buy part of Facebook instead. Yes, in 2007 Micosoft purchased 1.6% of Facebook for $240 million. Mr. Ballmer great move as back then Facebook was valued at only $15 billion. Since Facebook’s value has increased enormously with anlaysts projecting the company to be worth roughly around $100 billion, ridiculous I know. As a result, Microsoft’s FB shares have done quite nicely so Ballmer decieded to follow the same route as Goldman Sachs & sell 6.56 million of their 32.8 million Facebook shares at a mid-IPO price of $31.50. This sale will make Microsoft $206.5 million almost recouping their initial investment & allowing them to play with the houses money holding over 26 million shares still.
2. Goldman Sachs (NYSE: GS) - You might know them as the evil nemesis on Wall Street as Goldman Sachs’ leaders consider investment banking to be “God’s Work,” however when it comes down to money managing GS is great at what they do. Goldman is currently selling 13.2 million shares of their 65.9 million Facebook shares. Selling at the mid IPO price of $31.50, Goldman stands to make $415.5 million coming close to recouping their initial investment while still holding 42 million more shares. I love their strategy in this one, selling another to get back their initial investment so they can just play with the houses money!
Recommendation Buy: I foresee GS not really having too much movement in the near future, kind of hovering between $106-$120. One thing to watch out for is if the stock makes a good one-day run during FB’s IPO based on their large investment & just the media buzz swirling around the two, will be interesting to watch!
3. Jive Software (NASDAQ: JIVE) - Jive provides social business software platforms to companies, government agencies, whoever! They’re often called the “Facebook for Enterprise”, originally went public in late 2011, shares have performed strong ever since gaining 42% this year already. Recent critics have questioned the company’s valuation & fundamentals resulting in shares falling however this could just create a good entry point for new investors.
Recommendation Hold: Jive’s a very interesting & intriguing play however I think there are better stocks to own out there right now so I’m sitting tight.
5. Equinix (NASDAQ: EQIX) – Based in Redwood City, California, Equinix is just like DLR, a data center company and also a client of Facebook as they are among one of their top customers along with financial services and data networking companies. EQIX recently posted outstanding 1st-quarter earnings & revenue as numbers jumped over 25% as their cloud computing mobility & data mangement businesses grew significantly as they reported $452.2 million in revenue. As a result, EQIX has been a great investment so far in 2012 appreciating over 55% mainly due to them beating all consensus analysts estimates with their strong 1st-quarter report.
Recommendation Hold: While EQIX looks to be a little overweight at the moment as they are coming off strong recent surges & shares should rise further due to FB’s IPOwe still think it is a strong buy and believe shares will continue to rise on strong future 2nd-Quarter earnings. So investors buy in and ride this one out as EQIX is a stock with lots of potential.