Facebook Falls After Earnings — What Five Investors Are Saying About the Stock Now

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Shares of Facebook fell 5% on Tuesday.

The social media company beat on earnings but missed on revenue and average monthly users when it reported quarterly results Monday evening.

Five experts discuss what they think about the stock now.

Nadine Terman, founder and CEO of Solstein Capital, said Facebook is investing to offset weakness in its core business.

"It sounds like it's not so bad that people are going to throw it out but not so good that people are going to get excited. Whenever you separate out a business and you say there's going to be a lot of cost there but it's going to be our growth engine, it's just a creative way to say I don't want to hit my margins on the other businesses but show you what I'm investing. I'm not saying it's a bad route, but that's what's going on. They have to invest because they're not getting the growth in their initial businesses. And so as an investor, that should be an area of concern which gets to the point that many folks here made which is, is it because they're not getting the takeup in the younger generation?"

Jim Lacamp, senior vice president of Morgan Stanley Wealth Management, said what happens to Facebook next could have a big impact on the rest of the market.

"They announced a $50 billion share buyback, that's been a recurring theme throughout this. They missed revenues. ... So Facebook's one of eight stocks that make up 26% of all the market cap right now. And as long as they keep buying these eight stocks, the market is probably not going to fall apart on us. And if they keep moving these eight stocks higher, it's going to drag other areas up."

Mark Mahaney, head of internet research at Evercore ISI, said Facebook prepared well for the expected advertising changes from Apple.

"Snap disappointed people last week and Facebook just did, too. I'm struggling to recall the last time that Facebook missed revenue and lowered revenue estimates like this. The good news is, however, that unlike Snap, Facebook management told people about this IDFA [Identifier for Advertisers], this Apple risk, they've been talking about it for a year, and then the stock got slapped down because of that, slapped down because of the Snap results and so the risk-reward wasn't nearly as … tilted as it was for Snap."

Rohit Kulkarni, analyst at MKM Partners, said Facebook is ahead of the rest of the advertising tech companies such as Snap.

"After the Snap results, there was a lot of fear and anxiety in the investment community as to how bad can it get for Facebook and other people. I think what Facebook is showing is that they prepared for Apple IDFA, they are probably three or up to six months ahead of the rest of the ad tech ecosystem. They essentially rebuilt almost big fundamental parts of their ad tech and they are seeing the results of this."

Gene Munster, managing partner at Loup Ventures, puts Facebook's daily average user metric in perspective.

"In this case, it was the DAU numbers, up [6%]. ... It was still up ... that is consistent with how DAUs grew before the pandemic for the previous few years. And so essentially what you have is I think investors recognizing something that your traders talked a lot about in the last couple days, is this dynamic where there is no other place to go beyond Facebook."


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