Why Facebook's No Fraud; Cisco Disappoints; What's Up With Solar? - Eye On Tech

| About: Facebook (FB)

Summary

Facebook announced more inaccurate ad metrics, but it's not a fraudulent company.

Cisco beats on earnings but gives lackluster guidance.

First Solar tumbles on new guidance while the industry remains pressured.

In September, Facebook (NASDAQ:FB) came under scrutiny for inflating its video-ad metrics, showing advertisers that the videos had garnered more views than they had previously thought.

Many thought this was a non-issue, particularly because Facebook identified the error on its own. The argument also went along the lines that even with the new metrics, Facebook is still the best when it comes to reaching potential customers.

Despite more issues being reported (again by Facebook), I actually do believe that the above argument is correct.

I could be wrong in my assessment, but I don't buy into the "Fraud-Book" argument that says Facebook is intentionally misleading advertisers.

Will the new results cause some companies to think twice about piling their ad dollars into the platform? Perhaps, but I still think the argument stands that Facebook remains the premier way for most businesses to reach its customers.

Facebook has demonstrated that its self-regulation of the advertising process is very transparent. If it weren't transparent, these recent metrics errors would have never seen the light of day. The company does a good job (and a better one every day) of showing advertisers more useful metrics for making their advertising choices.

Together over time, both Facebook and advertisers are looking to become more and more efficient when it comes to reaching customers simply because it's in both of their own interests.

Fraudulent behavior really only makes sense if Zuck & Co. were in it for the short term and planned on bailing when the empire came crashing down. By reporting these errors and constantly focusing on the longer term, it shows that the company isn't being fraudulent; it's looking to be around for years and years into the future, and be the premier way of advertisement and connecting users.

Cisco Beats on Earnings, Falls Short of Guidance

I'm no market pro, but it's not hard to see the rotation that's happening in the market. Money is flowing out of tech stocks and various other industries, and flowing into industrials, banks and infrastructure stocks. How long it will continue I personally do not know.

But one thing is pretty clear: reporting not-so-hot earnings isn't going to help. Shares of Cisco (NASDAQ:CSCO) are down more than 4% in Wednesday's after-hours session after the company provided lower-than-expected guidance for next quarter.

Analysts expected sales for next quarter to be up 1.8%. Instead, Cisco guided for a drop of 2% to 4%. EPS expectations of 55 cents to 57 cents per share fell short of analysts' expectations of 59 cents per share as well.

That miss overshadowed the company's top and bottom-line earnings beat.

While FANG and the PowerShares QQQ ETF (NASDAQ:QQQ) haven't been doing too hot, shares of Cisco had actually been trading OK. Perhaps that's why it's down in the post-market, as investors' expectations had climbed too high.

It doesn't hurt that the company's PE ratio is low and it pays out a dividend yield of 3.3%. Is Cisco a company in transition or just a dinosaur tech play that is struggling to post any growth? It's a great debate really - one we can carry out in the comments section too.

Cisco is making some turns, but there are questions as to whether those moves are going to pay off in the future. Depending on the overall market, it may not matter, for better or for worse. Meaning that, if the broader markets decide to correct, good results will be overshadowed by a declining stock price. Conversely, so-so results like we saw tonight may be overshadowed if the corporate tax rate is lowered, the economy remains steady and if rates stay low.

What's Up With Solar?

Shares of First Solar (NASDAQ:FSLR) took a dive in after-hours trading after raising its full-year 2016 earnings guidance, as well as announcing guidance for 2017 that fell short of analysts' expectations when it comes to earnings, revenue and shipments.

The after-hours decline has the stock down more than 13% to new 52-week lows. The price action has to be discouraging, especially after the company just reported earnings earlier this month that also caused a big selloff in the stock.

First Solar is now down about 30% from its November 2nd closing price - a noteworthy decline for a stock that many viewed as the best play in its industry.

Overall though, the solar industry has been struggling. Shares of the Guggenheim Solar ETF (NYSEARCA:TAN) are hovering just above 52-week lows, with a noticeable decline coming after the election. Of course, the rationale behind that is simple: Most view president-elect Donald Trump as a negative for alternative energy. Instead, investors are under the belief that a Trump administration would be better for coal, oil and other fossil fuel-based energy sources.

That stance is reasonable, considering his comments regarding the EPA and his argument that "the concept of global warming was created by and for the Chinese in order to make U.S. manufacturing non-competitive." Granted that was in 2012, but nevertheless it's reasonable for investors to be concerned about the solar industry given the government's potential new direction to have little focus on renewable energy sources.

That's part of the reason analysts at Axiom cut their ratings on a number of different solar stocks.

In short, it's simply too unpredictable a place to be invested right now.

It makes me wonder (and kind of concerned) about what Tesla (NASDAQ:TSLA) could be getting itself into with its planned acquisition of SolarCity (NASDAQ:SCTY).

It Should Also Be Mentioned…

That even though this is a tech-based newsletter, it's noteworthy that JPMorgan (NYSE:JPM) CEO Jamie Dimon will apparently serve as the Treasury Secretary.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.