Facebook and Starbucks Disappoint After Hours

Although we don't believe in timing the market or panicking over daily movements, we do like to keep an eye on market changes -- just in case they're material to our investing thesis.

After posting nearly two weeks of consistent gains following the end of the government shutdown, stocks took a breather today, falling after the Federal Reserve announced its decision to maintain its monthly bond-buying program of $85 billion a month. The Dow Jones Industrial Average (DJINDICES: ^DJI  ) tumbled momentarily more than 100 points but recovered moderately to finish down 62 points, or 0.4%. What seemed to jerk the blue chips downward was some surprisingly optimistic statements from the Fed, noting that "indicators of labor market activity have shown some further improvement." That remark could mean that investors will see the taper sooner than expected. Throughout much of the year, the market has taken the counterintuitive approach of rewarding bad news as investors assume that that will force the central bank to keep the stimulus in place longer. Meanwhile, ADP reported just 130,000 jobs were added in October, a lower rate than needed to bring the unemployment rate down, and a check in favor of a longer-lasting stimulus.

Facebook (NASDAQ: FB  ) shares spiked briefly after hours as the social-networking giant beat expectations on both top and bottom lines, but finished flat after CFO David Ebersman said the company would not increase the frequency of its ads, which currently show up once for every 20 stories in users' news feeds. Also troubling to investors was Facebook's admission that teens are using the service less, specifically younger teens. Considering the fleeting supremacy of past social-network leaders such as MySpace and Friendster, the decline is a reminder that Facebook, despite its billion-strong membership, has no lock on users' eyeballs. Still, revenue growth of 60% indicates that the company should have several years of growth ahead of it.

Starbucks (NASDAQ: SBUX  ) also reported earnings after hours with shares falling 2.5% despite an excellent quarter. Earnings per share grew 34% to $0.63, topping estimates of $0.60, while same-store sales jumped 7%, an impressive clip for a company of Starbucks' size and age. Still, investors were disappointed by the company's guidance as the coffee chain projected per-share earnings for 2014 of $2.55-$2.65, below the analyst consensus at $2.67. Starbucks shares have surged over the past year, nearly doubling, and its price tag has become inflated along with it, now at a P/E 35. With a valuation like that and the low guidance ahead, the stock may have hit a ceiling for now.

More great growth stocks
Starbucks may have hit a lull, but it's still got the goods for long-term growth, or so says Motley Fool co-founder David Gardner, creator of the world's No. 1 growth-stock newsletter. He's developed a unique strategy for uncovering truly wealth-changing stock picks, and he wants to share it, along with a few of his favorite growth stock superstars, with you! It's a special 100% free report called "6 Picks for Ultimate Growth." So stop settling for index-hugging gains, and click here for instant access to a whole new game plan of stock picks to help power your portfolio.


Read/Post Comments (0) | Recommend This Article (1)

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.

Be the first one to comment on this article.

DocumentId: 2706893, ~/Articles/ArticleHandler.aspx, 4/17/2014 5:39:00 PM

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...


Advertisement