| Stock (Symbol) | Stock Price | |
Facebook (FB) |
$75 |
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| Data is as of | Expected to Report | Sector |
November 4, 2014 |
Jan 27 – Feb 2 |
Technology |
| Sharek’s Take | ||
 Facebook is experiencing slower revenue growth, and combined with higher spending on things like WhatsApp mean profit growth coul;d be in the mid-teens next year — a BIG slowdown from triple-digit growth this year. This is not good news, and I sold around half my position in FB last week. Facebook just completed its acquisition of WhatsApp, the largest mobile messaging service in the world, but it needs to make money on this new toy, and that will take time. In the meantime FB gave WhatsApp staff stock/stock options and that will hurt EPS. Sales growth is slowing too, from the 60% range to maybe 45% next qtr. I’m taking my Fair Value P/E from from 60 to 44, and FB now has just 13% upside to 2015’s Fair Value of $84. |
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| One-Year Chart | ||
 Facebook is selling for 39 times earnings right now, which is around where it should be. Right now Wall Street doesn’t mind the mid-teens profit growth for next year, as the stock hasn’t suffered since it reported. Notice in Estimates the teens-growth is already starting to show. |
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| Earnings Table | ||
 Quarterly profits were expanding rapidly — from $0.19 to $0.42 the past 5 qtrs. But FB only made $0.43 LastQtr, just a penny more than it made the qtr earlier. Facebook had 59% revenue growth last quarter, down slightly from 63% 2QtrsAgo. Profit growth was 72%.FB only beat the street by 4 cents. It had beaten by more the prior two qtrs. Annual Profit Estimates took a hit. This takes FB from being a top-tier growth stock. 42% sales growth is expected in 2015, but only 14% profit growth. You can see the mid-teens profit growth on the horizon. |
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| Fair Value | ||
 I’m taking my Fair Value P/E down from 60 to 44, but the stock could easily sell for 40 times earnings next year and be around what it is today. There’s good upside for 2016, but that’s a long way away. |
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| Ten-Year Chart | ||
 This stock has had a nice run, and now maybe it gets a chance to catch its breath. |
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| Power Ranking | Bottom Line | |
Growth Portfolio
8 of 25 |
Facebook is going from triple-digit profit growth to maybe teens profit growth next year. That’s got to take momentum away from the stock. I’m taking FB way down in my Power Rankings, and have sold around half my clients shares. |
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Aggressive Growth Portfolio
8 of 12 |
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