Investor's window  |  July 27, 2012 14:28:26

Facebook Shares are to be written off


Yesterday Facebook announced the results have raised hopes for a short time idle. The company is reported slightly better than expected results, both at the level of sales and profits and the number of customers. The share price suddenly increased by 8% to 29 USD. Yet in the wake showed that the reason to celebrate none. Investors get is much needed perspective in the form of a crutch, where Facebook is heading. Reaction -12% after the conclusion of trade says it all.

The reasons for concern are countless, but Facebook also offers some interesting opportunities. The biggest concern is the pace of future growth. The subscription price at the IPO indicated that the growth in sales and profit growth to surpass several competitors to match the realities of business valuation. But the reality seems to be different. The annual growth rate reached 32%, the lowest figure for the time what Facebook publishes statements.This revenue growth is in stark contrast to the increase in cost or number of employees. For example, marketing costs rose by 280% and the number of employees grew by 50%. It only refers to the temporary inability of companies to effectively generate sales, respectively. profit. Other risks, such as very low percentage of clicks on banners or potential risks associated with litigation on personal data protection are equally important, but let's focus now on the opportunities that are before Facebook.

Crucial to the future and the only way to significantly promote the company's value (share price), the revenues from advertising on mobile devices. For more than half of the 955 million Facebook users is running on mobile devices, but in the past year, the contribution to revenues from mobile advertising zero.An application that displays advertisements on the mobile version of Facebook, was introduced in February this year. There is no doubt that the potential in this segment is huge, but yet unexplored, and "vague." On the other hand, it is clear that the sales / profits of the company will accrue gradually. The potential is in the company is, just does not meet the expectations of investors, the firm quickly enough, which is reflected in the declining share price (however extreme expectations set the company itself high subscription price).

Negative reaction to yesterday's results is not inconceivable, but where the decline stopped? In my opinion, be strong in the short term psychological threshold level of $ 20.Essential for long-term development of the shares should be the next quarterly results in October, which would already be reflected in the management of revenues from advertising on mobile devices, but also would begin to have a positive impact on the costs incurred research and development, which grew by 600 %! From the above it is clear to me that it is premature to write off this title.

Menčík Thomas, an analyst at Cyrrus

Marek Hatlapatka (1978)

He graduated from the Faculty of Economics VSB-TU Ostrava, completed 3-month internship in London and fundamental analysis intensive course led by former chief analyst of Erste Bank Gale Kirking. In Cyrrus, as has been employed since 2006, when he took the place of stock market analyst focusing on foreign markets, pharmaceutical and banking sectors. Subsequently, he specialized in banking, electricity and coal in these sectors are now the most sought after professionals in the Czech Republic. In 2008 he became head of analytical department Cyrrus, as in this position operates even today.Long one of the most cited Czech economist, in 2010 became the fourth most cited economist in the Czech media.

Cyrrus, as is a licensed securities broker. The company was founded in 1995 and is currently the largest brokerage companies outside Prague. It is a member of the Stock Exchange and Prague Stock Exchangein Warsaw. Cyrrus, Inc., provides comprehensive services to private capital markets and corporate clients, focusing on exchange transactions in the system SPAD Prague Stock Exchange and trading on foreign markets in Poland, Hungary, Turkey, Germany and the USA. The company is one of the most important Czech businessmen with investment certificates.

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