Investors Bearish Regarding Facebook's Earnings

Investors Bearish Regarding Facebook's Earnings

Facebook Inc. (NASDAQ:FB) will publish its first ever results since becoming a public company tomorrow. The company has experienced dismal performance on the NASDAQ stock exchange since its listing, and according to reports, its options have also been bearishly skewed, with investors concentrating on positions with short term expiry dates, commonly known as Weeklys, that expire at the end of the week, reports Reuters.

The company is expected to announce its Q2 results on Thursday, and investors are almost restless, as they anxiously wait to see the company’s performance since May 18. Additionally, this will serve as a perfect measure of Facebook’s resolution to affirm its status as a social media king pin, after exhibiting a mediocre performance on the stock market since its listing.

The company has already tanked nearly 25% from its listing price of $38 per share, and current forecasts indicate that the price is likely to fluctuate by approximately 14%, which implies an upward or downward movement of around $4.00 based on the current price of roughly $28.

The company’s stock had recouped some of the lost value in June to trade above $30 per share, as demonstrated in the chart below; but recent decline has  resulted in a short-lived bullish prospect from investors, which also saw the company’s founder and CEO, Mark Zuckerberg  fall from Bloomberg’s richest 40 list, according to our initial post.

 Daily Chart of FB since May 2012

Furthermore, the company is still haunted by the ‘ghosts’ of its botched IPO, with several investors still demanding compensation from NASDAQ OMX Group, Inc. (NASDAQ:NDAQ), in regard to the infamous 30 minutes of technical blackout on the opening day of Facebook Inc (NASDAQ:FB)’s activity at the market.

Several media channels are also of the opinion that Facebook Inc (NASDAQ:FB) will miss its second quarter earnings target, further confirming the bearish outlook of the company’s stock as the announcement day draws near. Consequently, this is replicated in the options market, with a majority of the traders opting to write long positions (CAlls) as compared to short positions (PUTs). According to Reuters, 62,000  FB calls and 53,000 FB puts had traded as of Tuesday, July 24.

Facebook Inc (NASDAQ:FB) has made several investments since its listing, as well as internal developments. The company acquired, and most recently introduced a feature that helps you find friends nearby, rumored to have originated from the acquisition of Glancee. The company is also in the process of testing a new ad campaign, dubbed sponsored results  search ads, which is expected to increase its revenues. Earlier in June, the company achieved a lifetime dream, after Apple Inc. (NASDAQ:AAPL) finally opted to integrate its device, iPad, with Facebook.

After all these developments, coupled with poor performance at the stock market, it is difficult to predict the direction  of the anxiously awaited swing of the company’s stock after Q2 results. Reuters predicts revenue of 1.15 billion for the second quarter representing a 28% growth rate.


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