Well Facebook (FB) will report earnings after the market closes this Thursday, July 26th. The conference cal will begin at 5pm. Here’s what I think will happen:
Facebook Beats Because They Cooked the Books?
There’s no doubt in my mind the company will beat the street. I think management stuffed the channel this quarter — taking profits from last quarter and having them ready to post this quarter. In April — just weeks before the IPO — FB announced first quarters sales rose 45% yet profits dropped 12%. How does a big company doing a billion in sales with no “cost of goods sold” have profits down when sales are up? I think they cooked the books. Not much, just a little simmer. To set up for a great quarter after the stock is public. Let’s get some headlines!
Mark, How Was Your Vacation?
I seriously doubt Mark Zuckerberg is going to apologize for going missing in the weeks after the IPO when the stock was falling from $42 to $30. Dude was totally MIA. He didn’t call the honeymoon short, didn’t stop to make a call to investors or issue a statement. Nothing that I am aware of. And seriously, Facebook was all over the financial news, I would have been aware of it.
I would have felt better had dude done the IPO, smoked a big blunt, and partied Gronk style. At least he’d be back to work the next week.
Zuck Taking Notes From Sergey and Larry
Instead of soothing investors Zuck made it all about him. Just like Larry and Sergey. They don’t work for us. Thanks for the money, I’m out.
I don’t like this mentality. Be humble. They aren’t. They are entitled. That’s why I think Facebook is going to be the next Google — getting little respect from the money managers on Wall Street. FB will make a ton of money and keep it. I seriously doubt the company will issue a dividend to pay back its shareholders in anyway. Nope. Make the money and keep it, just like Google does. Management will spend it where it wants and you can’t do anything to change that.
If Facebook starts to act like Google then FB stock could really fall. GOOG is selling for around 14 and a half times earnings right now. That’s really cheap. It’s cheap because Google management doesn’t give earnings guidance and doesn’t pay a dividend. Management makes it rain on projects sometimes and just puts it into the earnings report. Deal with it. That’s the mentality Google has, and us on Wall Street don’t like it.
Facebook’s P/E is around 60. That’s a long way from 14.
Sharek’s Take
Facebook is selling for around 60 times earnings. I think the company will make a lot more than the $0.50 or so that’s projected this year. The problem will be the P/E coming down once management gets on the call and does a Google.
Disclosure: clients of David Sharek owned shares of GOOG & FB at the time of publication.