Why Is Everybody Turning on Facebook Again?

Facebook (NASDAQ: FB  ) is back to being an underappreciated, busted IPO. Two analysts in two days have talked down the leading social networking website operator.

Yesterday it was Bernstein Research's Carlos Kirjner downgrading the shares and slashing his price target from $33 to $27. He's left unimpressed by the company's 18% increase in ad rates over the past year. He also feels that the mobile advertising upside has already been baked into the stock and analyst estimates.

Today it's BTIG Research's Rich Greenfield checking in with a gloomy sell rating and a frightening $22 price target. Greenfield's model shows lower revenue and EBITDA projections than his peers through the next three years, and that's factoring in the boom in mobile growth at Facebook and inevitable ad initiatives.

The engagement of mobile users remains a popular sticking point with most worrywarts. Cynics just don't get it. Haven't they seen the Facebook Dollar Store?

Bucking the trend
Surfing through Facebook earlier today I was offered the opportunity to buy a boxed heart-shaped cookie for my wife. The site may have been guessing about my wife liking butter-cream frosting, but it obviously knew that she was my wife. It naturally knows that Valentine's Day is around the corner.

The simple gift cost just a buck, shipping included. It seemed too good to be true, but the merchant knows what it's doing. It's establishing a marketing connection, and including a bonus $5 gift card with the $1 gift will increase the chances that my wife or I will lean on them in the future -- if the cookie's good.

Checking out was seamless, and the default option of having the gift appear on her timeline -- as a gift-wrapping graphic that she can virtually peel away as soon as she confirms her shipping address -- was brilliant as a viral touch. As soon as I checked out, I was reminded of six friends and family members that have birthdays coming soon.

Facebook Gifts launched to little fanfare late last year. Your local mall didn't quiver in fear. Amazon.com (NASDAQ: AMZN  ) went on to hit new highs. Nobody's afraid of a $1 delivered cookie or the other buck items with free shipping that currently include chocolate "Be mine" lollipops, champagne gummy bears, or honey-infused jelly beans.

Just wait.

Just wait until more of the gift items start showing up on timelines. Just wait until Facebook collects more credit cards.

Just wait.

Facebook has the advantage of knowing not just its shoppers but its recipients. Try as Amazon might, it will never get there. Try as your local mall might, it will never get there.

Facebook may be losing two more analysts but it may be gaining more cheap gift seekers like me in the near future. In the end, that may be more important.

Don't deny this friend request
After the world's most hyped IPO turned out to be a dunce, most investors probably don't even want to think about shares of Facebook. But there are things every investor needs to know about this company. We've outlined them in our newest premium research report. There's a lot more to Facebook than meets the eye, so read up on whether there is anything to "like" about it today, and we'll tell you whether we think Facebook deserves a place in your portfolio. Access your report by clicking here.


Read/Post Comments (2) | Recommend This Article (2)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On February 18, 2013, at 4:35 PM, chastenruin wrote:

    Until Facebook can prove it can make money without alienating its existing customers, I'm steering clear. I still dont see a viable business model and I am not putting my money down without knowing the business model can work.

    Pandora and Netflix at least have a business model that makes sense. Pandora has ad support and subscriptions. Netflix is subscription based with flat licensing deals with content holders.

    Facebook is...figuring out a way to microcharge their users without upsetting them off too badly or completely selling off their privacy.

  • Report this Comment On March 05, 2013, at 5:41 PM, brettOBR wrote:

    Facebook gifts is early but it shows potential. One area of weakness is that the current product recommendations are not really advanced. As an alternative, if you want truly personalized gift recommendations for Facebook friends check out giftivo.com.

Add your comment.

DocumentId: 2251696, ~/Articles/ArticleHandler.aspx, 4/16/2014 9:44:33 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated Moments ago Sponsored by:
DOW 16,262.56 89.32 0.00%
S&P 500 1,855.81 12.83 0.70%
NASD 4,034.16 0.00 0.00%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

4/15/2014 4:00 PM
FB $59.09 Up +0.20 +0.00%
Facebook CAPS Rating: **
AMZN $316.08 Up +0.17 +0.00%
Amazon.com CAPS Rating: **

Advertisement