MorningWord 5/28/13: What the hell is wrong with FB?? I keep getting this question from pros and from Mom & Pop (not my my mom and pop, they still don’t know what it is). On Wednesday’s Fast Money program (below) we highlighted FB’s ytd performance (now down 8.6% ytd as of Friday’s close ) which is massively under-performing the Nasdaq (up about 14.5%) and stocks like YHOO (up 32%), GOOG (up 23%) & even MSFT (up 28%).
Aside from just looking my usual handsome, I highlighted the fact that from a purely technical standpoint the chart was (and remains) particularly challenged when the stock was $25, and now looks to be testing a fairly important prior resistance level after last summer’s breakdown.
From a fundamental standpoint, fellow panelist, Josh Brown of the Reformed Broker blog, and social media maven mentioned the fact that the kids today are using FB less and less in favor of more micro blogging or focused sites like Instagram (which FB bought last year for $1b), Twitter and WhatsApp, which is has been a frequent topic in the media (here).
Back on May 9th when the stock was $27, I debated the formidable Guy Adami of Optionmonster on the merits of FB as a stock (I was the bear), but my main points were these:
Subject: Re: 5pm – New Street Fight – Facebook
I guess my main take-away at the time was the overwhelmingly negative response to FB on Twitter as the viewers weighed in and were steadfastly in support of the Bearish view. This struck me like a ton of bricks, based on my assumption that tons of retail investors still own the shares. By no means is this story over, and I would suspect that a trans-formative acquisition, something like a knockout bid for Twitter would change investors psychology on the stock very quickly.
Full disclosure I don’t use their product, and never will but my kids, both under 10, have recently asked for Twitter accounts not Facebook. That is not a good anecdotal sign for future growth in the developed world.
Something has to give here and soon, and I suspect the stock will continue to trickle lower unless the company can create some sort of Killer Social App, not just maintain their lead in the soon to be Myspace-esque service. If and when the stock gets washed out, back towards the previous lows, I would assume that would be a good spot to take shot, that Zuck and crew, who state they are taking the “Long View” will be able to right the ship. I still contend though that a stock and cash deal valued in the mid to high teens for Twitter would like see the stock rally sharply, gaining much of the market cap put up to make such a deal. IN the meantime it feels like a slow blood as the stock continues to see little incremental buy interest.