I joined MONEY with Melissa Francis on Fox Business Network this week to talk about Facebook (NASDAQ:FB) earnings and the future of the stock.
In a nutshell, I think the company is in deep trouble.
As I wrote in a recent column, the factors working against Facebook are:
- An earnings miss and big cash burn as it invests in itself … with little immediate payoff.
- Despite the fact that 70% of monthly active users were on mobile (751 million of 1.1 billion total), the mobile segment generated only 30% of all ad revenue.
- Operating margin dropped to 26% from 36% and the average revenue per user was a paltry $1.35 in the latest quarter.
- Facebook fatigue as people tire of the social network or unplug because of privacy concerns.
I am not altogether convinced that Facebook is entrenched. But even if it is, the company is dominant with very little growth potential in users and even less potential in margin growth. That seems to be a recipe for stagnation at best.
Check out the video above or watch it on MONEY with Melissa Francis.
- My full take on why Facebook is a sell after earnings. (The Slant)
- Facebook earnings: A split decision. (InvestorPlace.com)
- The official Facebook earnings release. (FB Investor Relations)
- A great recap of slides from the FB earnings presentation. (Tech Crunch)
Jeff Reeves is the editor of InvestorPlace.com and the author of “The Frugal Investor’s Guide to Finding Great Stocks.” Write him at email@example.com or follow him on Twitter via @JeffReevesIP. As of this writing, he did not own a position in any of the stocks named here.