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Facebook Snags WhatsApp and Tesla Jumps After Hours

By Jeremy Bowman – Feb 19, 2014 at 10:00PM

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The Dow gave up nearly 100 points after the Fed's minutes came out, while investors digested news of Facebook's $19-billion acquisition of WhatsApp. Tesla shares also accelerated on earnings once again.

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.

Stocks traded even most of the day, but dipped late after the Federal Open Market Committee's minutes from its last meeting were released. As a result, the Dow Jones Industrial Average (^DJI) finished down 90 points or 0.6%, while the S&P 500 dropped 0.7%. Investors, apparently, weren't happy with the Fed's plans to continuing tapering its monthly bond-buying program, barring any significant changes in the economy. According to the notes: "Several participants argued that, in the absence of appreciable change in economic outlook, there should be a clear presumption in favor of continuing to reduce the pace of purchases by a total of $10 billion at each FOMC meeting." Elsewhere, housing starts and building-permit numbers both disappointed the market, coming in at 888,000 and 937,000, but investors seem to attribute the drop to poor weather. Inflation indicators, meanwhile, showed only modest price increases in January. 

Facebook (META -0.17%) was making waves after hours after it scooped up messaging service WhatsApp for the whopping sum of $19 billion. Facebook shares were down 2.7% on the news as investors may think that the social-network giant overpaid for the messaging app. The industry leader will pay $4 billion in cash, $12 billion in stock, and $3 billion in restricted shares that will vest over the four years for a service that counts over 450 million members, 70% of which use it everyday, and whose messaging volume is approaching the entire global SMS telecom volume. WhatsApp is also adding 1 million members every day. Facebook will leave the WhatsApp brand in tact and it will continue to operate it as a stand-alone application, and WhatsApp co-Founder Jan Koum will join Facebook's Board of Directors. The purchase is certainly a bold one for Facebook, but the company understands that its namesake site alone is not enough to dominate the future of social media. Just as it did with Instagram, the company is making a smart move but seizing another industry growth star. Observers can argue about the price tag, but this is the right strategy for Facebook.

In earnings news, Tesla Motors (TSLA -3.21%) soared past estimates in its earnings report once again as shares jumped 13% after hours. The electric-car maker posted a per-share profit of $0.33, ahead of estimates at $0.21, while revenue skyrocketed 148.5% to $761.3 million, much better than the consensus at $673.1 million. Even better, the company lifted its 2014 guidance, saying it expects to sell 35,000 Model S Sedans this year, ahead of previous projections at 29,000, which would give it a 55% increase over last year's total.  The company also plans to step up its production from 600 to 1,000 cars a week. Tesla shares have a sky-high price tag at a forward P/E of 121 and a market cap near half of General Motors, but shares should keep moving higher as long as the company continues to beat estimates and lift its guidance.   

Jeremy Bowman owns shares of General Motors. The Motley Fool recommends Facebook, General Motors, and Tesla Motors and owns shares of Facebook and Tesla Motors. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Stocks Mentioned

Dow Jones Industrial Average (Price Return) Stock Quote
Dow Jones Industrial Average (Price Return)
$33,596.34 (%)
Meta Platforms Stock Quote
Meta Platforms
$113.93 (-0.17%) $0.19
Tesla Stock Quote
$174.04 (-3.21%) $-5.78

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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