When the lockup period for nearly 800 million shares of Facebook (FB) ended, shares did not fall as many predicted. Looking at other social media companies that faced lock-up expiries, investors should note the major rallies for Zynga (ZNGA) and Yelp (YELP). Zynga rallied significantly earlier in 2012 even after insider share sales and stock issuances. Conversely, Yelp shares held strong despite lock-ups ending:
Facebook rose because insiders did not all sell at once, on November 14. On the same day the company announced a job app, along with other revenue-generating ideas. Shares in LinkedIn (LNKD) hardly moved that day. An online retailing and travel site tool was also launched, along with announcements for new partners for its gifts e-commerce initiative.
Trading Environment Matters
Most of the existing share float represents retail accounts that bought Facebook when it IPO’d at $38.
Friday, November 16 was the day options expired, so a rise in Facebook shares benefited many options holders.
Facebook is unlikely to dislodge the business users from LinkedIn. Facebook’s job app works by displaying jobs from Monster (MWW) and other sites. Investors should recognize that these ideas do generate revenue, but unless they evolve and innovate in a positive way for its users, profits will be light.
The value Facebook Gifts will take time to assess. Gifts, which, lets users buy gift cards and other gifts for their friends, right from their timeline on mobile or desktop, is not yet a proven retail model.
Facebook is widely-followed by Kapitall users. Users will need to decide if the rally is sustainable, or if Facebook’s valuation will continue to decline. Froth left the market, but the high valuation in Facebook will need to be supported by above-average revenue and growth.
Business Section: Investing Ideas
Social media companies to watch are:
1. Facebook, Inc. (FB, Earnings, Analysts, Financials): Engaged in building products to create utility for users, developers, and advertisers. Market cap at $49.65B, most recent closing price at $22.92.
3. Yelp, Inc. (YELP, Earnings, Analysts, Financials): Connects people with local businesses. Its users contribute reviews of every type of local business. Market cap at $1.19B, most recent closing price at $18.80.
Related Internet companies to watch are:
5. Apple Inc. (AAPL, Earnings, Analysts, Financials): Designs, manufactures, and markets personal computers, mobile communication and media devices, and portable digital music players, as well as sells related software, services, peripherals, networking solutions, and third-party digital content and applications worldwide. Market cap at $532.18B, most recent closing price at $565.73.
Further Reading: Zynga shares are treading above $2. A discussion on what happens when shares drop below that is discussed.
Written by Chris Lau. To interact and discuss these picks or picks of your own with users, attach your watch list or portfolio in a message to your friends on Kapitall. To connect with users on the leaderboard: from your tool bar, select Get Connected -> Top Kaptallists.
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Dig Deeper: Access Company Snapshots, Charts, Filings
- Facebook, Inc. (FB, Chart, Download SEC Filings)
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- Google Inc. (GOOG, Chart, Download SEC Filings)
- Apple Inc. (AAPL, Chart, Download SEC Filings)
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