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Cindy Reed is a 1990 "Masters of Accounting--Tax Specialty" graduate from the Marriott School of Management at Brigham Young University (BYU), Provo, Utah. The BYU Accounting Program has been independently ranked as one of the top five accounting programs in the United States for many... More
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  • Facebook Surprise--Thirteen Price Target Increases/Upgrades

    In searching for analyst comments with the recent Facebook (NASDAQ:FB) earnings release, I could not find many of the following thirteen price target increases/upgrades published in Marketwatch, in my E*Trade brokerage Facebook news feed, on Yahoo Facebook News Releases, with a Google Search, or anywhere else. I mainly only saw published the downgrade by BMO. These analyst opinions are important to investors, given the recent whipsaw after hours price action in FB stock from $58 to $47; and current high volume trading of over 200 million shares.

    The Facebook Quarter Earnings Slides released after hours show amazing worldwide growth in Daily Active Users, Monthly Active Users, Mobile Daily Active Users, and other metrics. This growth brought revenues and profits to impressive levels as of the end of Q3 2013. Some conservative statements during the conference call caused the after-hours whipsaw action and have hampered the FB stock today. However, investors should not take emotional actions but should look at Facebook's record of proven massive user growth. The associated growth of future financial revenue and earnings is securely entrenched and fully operational.

    The following chart shows that this week an overwhelming number of analysts validate this future growth potential:

    Analyst Ratings and Price Targets   
            
     FirmNew Price Old Price NewPast
      Target Target RatingRating
    1Wedbush72.50 58.00 OutperformOutperform
    2BTIG68.00 58.00 BuyNeutral
    3Evercore65.00 60.00 OverweigtEqual Weight
    4Needham65.00 65.00 BuyBuy
    5Topeka63.00 60.00 BuyBuy
    6Cantor63.00 40.00 BuyBuy
    7JP Morgan62.00 53.00 OverweigtOverweigt
    8Wells Fargo61.00 53.00 OutperformOutperform
    9Raymond James60.00 56.00 OutperformStrong Buy
    10Jefferies60.00 60.00 BuyBuy
    11Pivotal Research57.00 48.00 BuyHold
    12Janney56.00 50.00 BuyBuy
    13SunTrust55.00 32.00 BuyBuy
    14Deutsche Bank61.00 62.00 BuyBuy
            
     Downgrade      
    15BMO Capital50.00 50.00 Mrkt PerformOutperform

    Links to Each Analyst's Positions and Comments:

    1) Wedbush -- Michael Pachter

    2) BTIG -- Richard Greenfield

    3) Evercore Partners -- Ken Sena

    4) Needham & Company -- Laura Martin

    5) Topeka Capital -- Victor Anthony

    6) Cantor Fitzgerald -- Youssef Squali

    7) JP Morgan -- Doug Anmuth

    8) Wells Fargo -- Peter Stabler

    9) Raymond James -- Aaron Kessler

    10) Jefferies -- US Internet Team

    11) Pivotal Research -- Brian Wieser

    12) Janney Capital -- Tony Wible

    13) SunTrust Robinson Humphrey -- Robert Peck

    14) Deutsche Bank -- Ross Sandler

    15) BMO Capital -- Daniel Salmon

    Facebook Usage

    Impressive excerpts from the Facebook conference call give us background on the increasing usage of Facebook and increasing of future ad dollars. Specifically, Mark Zuckerberg stated,

    "According to comScore, around 20% of the time that people spend in apps in the U.S. alone is in Facebook services when you a lot of people in developing countries what service they care about using most, the answer is often Facebook."

    1) People are finding Facebook Ads Useful

    "The way businesses will experience this effort is that we will keep building better services for them to reach their customers with higher quality ads, more efficient leads with better targeting, better analytics and using richer formats. The way people will experience this effort is that the ads they see will become more and more relevant to their lives.

    "... a lot more people are finding their ads useful and engaging with them and the average daily actives is engaging with more than one ad per week.

    "Most people probably wouldn't expect to engage with ads that often, so I think it's a great time that people are finding ads useful and they are adding value to the experience on Facebook. I think there is still a lot of room to improve the quality of our ads and grow our business over time. So this is something that we are going to keep on investing in going forward.

    2) People spend more time with digital media (5.25 hr/day) than TV (4.5 hr/day) and up to 20% of that digital time is on Facebook

    "In 2013, for the very first time, people will spend more time with digital media than watching TV. Emarketer estimates more than 5.25 hours a day on digital services including mobile compared with 4.5 hours watching TV in the U.S.

    "Facebook is well-positioned to benefit from this shift. In the United States, Facebook including Instagram, just one in eight minutes people spend on the desktop, but one in five minutes on mobile. According to comScore, Facebook and Instagram have more mobile time spent than many of the next largest services including YouTube, Pandora, Yahoo, Twitter, Pinterest, Tumblr, AOL, Snapchat and LinkedIn combined (emphasis added). Along with this engagement, we believe that we have the best mobile ad product with ads that are integrated unit into newsfeed for people who spend the most of their time on Facebook."

    3) Increasing number of marketers spending ad dollars on Facebook both in North America and Globally

    "From brand to direct response, to local businesses to developers, more marketers are advertising on Facebook, because they recognize that our ads work to drive sales. This growth is taking place globally. In the third quarter, the number of Facebook advertisers in EMEA, nearly equaled the number in North America, reflecting global growth in our online advertising.

    4) Improving ad development and ad delivery

    "We are working in a number of areas to make the ad people see on Facebook better. More targeted ads are better and we are improving our ad targeting to increase relevance. We are investing in features like custom audience and partner categories to improve targeted. These are great tools that are still in their early days and we will continue to invest. ... We want to make it easier for marketers of all sizes to buy ads and measure their impact.

    Controversial Comment regarding Forward Ad Revenue

    During the call, comments from management indicated that they

    "do not expect to significantly increase ads as a percentage of news feed stories beyond where we were at the end of Q3. This is important because increasing ads in news feed has been a meaningful driver of our revenue growth in 2013, so this should be factored into your expectations for next year."

    This comment appears to leave some investors questioning future growth and caused a severe fading in the rally that was accompanying the Q3 2013 release.

    On a long term basis this comment is not as important because Facebook has never focused on driving ad revenue but has always stated that their number one goal was the users experience.

    It is obvious that advertisers will chase consumers, and that the Facebook advertising/consumer interaction is an important avenue for any serious advertiser to pursue.

    Impact to investors

    Since July 24th, with the Q2 2013 earnings report, the FB stock price has risen from $26 to a high of just over $54.83 on October 18th. During this time two investment camps have established a battlefield, the bulls are trenched in an "I told you so" this stock has momentum and an operating foundation that will keep growing. On the other hand the bears keep and "It is only a matter of time the stock is overbought" and have been shorting the stock.

    The movement of 250 million shares on October 31, day after Q3 earnings, is a strong indication of demand from a contingent of fund managers. With the strong Q3 2013 report those big money managers who have been waiting for a big pullback so they can finally add their chunk of FB stock to their massive portfolio will not wait much longer.

    Who sold 250 million shares? Those investors who want to take their profits off the table just in case Facebook does a major volume dump like Netflix (NASDAQ:NFLX) or Linked In (NYSE:LNKD).

    Who bought 250 million shares? Most fund managers realize that adding FB to their fund portfolio now can be compared with having Apple (NASDAQ:AAPL) positioned in your portfolio in the early 2000s.

    Summary

    With the recent conference call it is clear that Facebook is a great stock to set a long position, and it would be unwise to place a short bet against it.

    A premium multiple is warranted given that Facebook is only just beginning to realize the vast monetization potential presented by its global user base and an evolving portfolio of advertising products. I recommend that investors continue to accumulate shares of Facebook while they trade at a discount.

    Disclosure: I am long FB. 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.

    Tags: AAPL, LNKD, NFLX, FB, long-ideas
    Nov 01 11:19 AM | Link | 2 Comments
  • S&P says watch out GOOG will have problems; but has positive outlook for BIDU, AMZN, NFLX, PCLN, and BIDU
    I did not see this information widely published in the investment community and thought the seeking alpha community would like to see this the first day of the trading year.

    LINK:   http://www.prnewswire.com/search/?sch1=news&keywords=Kessler+2011+prediction

    12/29 02:46 PM

    NEW YORK, Dec. 29, 2010 /PRNewswire/ -- S&P Equity Research sees big developments for the Internet segment in 2011, including continuing challenges for Google (GOOG:$601.70,00$2.78,000.46%) , changes at Yahoo (YHOO:$16.67,00$0.24,001.46%) , a cloud offering from Apple (AAPL:$325.40,00$-0.07,00-0.02%) , and excitement from China.

    "The coming year should also be another year of solid growth, with double-digit gains for U.S. Internet advertising and retail spending," observed Scott Kessler, Information Technology analyst at S&P Equity Research.
    Following are Mr. Kessler's predictions for the Internet industry for 2011.

    1. We project that U.S. online advertising revenues and online retail spending will each rise 10% next year.

    2. We think Yahoo (YHOO:$16.67,00$0.24,001.46%) will engage in at least one significant transaction intended to generate/unlock shareholder value. Possibilities include sale of the stake in Alibaba Group, reduction of its interest in Yahoo Japan, and a material acquisition (perhaps focused on international, social media and/or mobile).

    3. We expect Baidu (BIDU:$99.223,0$0.513,00.52%) to make progress toward international expansion beyond China. Further offerings in Japan and/or other Asian countries seem likely, in our opinion. We also anticipate that the company will remain dominant in China and that it will continue to benefit from Google (GOOG:$601.70,00$2.78,000.46%) 's (GOOG 599 ***) problems in the country.

    4. We would not be surprised if Google (GOOG:$601.70,00$2.78,000.46%) experienced further issues in China, perhaps related to the registration and operation of Google Maps.

    5. We think Google (GOOG:$601.70,00$2.78,000.46%) 's continuing string of regulatory and legal woes will include a significant penalty or loss in 2011, potentially related to the Department of Justice blocking its proposed acquisition of ITA Software, Oracle (ORCL:$31.5461,$-0.0239,-0.08%) 's (ORCL 32 ****) claims involving Android, and/or continuing state and sovereign inquiries related to the company's Street View feature of Google Maps. The revised Google Book Settlement, which was filed over a year ago, might not even be approved by the court (even though it was agreed to over a year ago).

    6. One of Google (GOOG:$601.70,00$2.78,000.46%) 's major global initiatives next year will be related to local advertising, in our opinion. We think a major alliance and/or acquisition is a strong possibility.

    7. Getting back to books, we think Amazon.com (AMZN:$183.72,00$2.63,001.45%) will continue to be among the biggest beneficiaries of consumers making more purchases online, and we project its sixth straight year of revenue growth greater than 25%.

    8. We foresee growing competition between Amazon (AMZN:$183.72,00$2.63,001.45%) and Netflix (NFLX:$181.00,00$-2.67,00-1.45%) , but nonetheless forecast that the DVD-shipping and streaming-video company will increase subscribers to 27 million by the end of next year, from our forecast of 20 million as of the end of 2010 (the most recently released subscriber count was 17 million, as of the end of the third quarter).

    9. We believe, after much anticipation, that Apple (AAPL:$325.40,00$-0.07,00-0.02%) will bring iTunes to "the cloud," allowing customers to access their music and video files using the Internet, and wireless sync iTunes with compatible devices.

    10. We think the number of PayPal accounts (90.5 million as of the end of the third quarter) will exceed the number of active eBay (Marketplaces unit) users (93.2 million) next year (EBAY 28 ***). eBay could move to better monetize its payments business, perhaps via an IPO of PayPal.
     
    11. Expedia's (EXPE 25 ****) TripAdvisor is another marquee property wholly-owned by a public traded Internet company that we think would make sense as a potential IPO candidate. However, our prediction related to Expedia is that it continues to invest in and make progress in China.
     
    12. Given Expedia's growing assets in China and that market's strong growth trajectory, we expect priceline.com (PCLN 405 ***) to look to M&A activity focused on and in the country.
     
    13. We also expect notable M&A actions in the Internet segment. Not only will Google remain active, but we foresee international companies looking for franchise brands and businesses, perhaps of publicly traded companies.
     
    14. Despite the IPO market warming up somewhat in the second half of 2010, we think major social media companies like Facebook, Twitter, and LinkedIn are in no rush to become publicly traded entities. They have ample capital and flexibility for more financing, in our view, and we don't expect any of them to file S-1s in 2011.



    Disclosure: I am long BIDU.
    Jan 03 8:35 AM | Link | Comment!
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