Facebook Earnings Call

After the market closes today, Facebook will conduct its first ever earnings conference. With the share price hovering in the high twenties down from the IPO price of 38$, investors are looking forward to hearing what the plans going forward are for Facebook and most importantly their strategy for creating revenue.

As Facebook was hammered during the weeks following the IPO with conversation regarding the doubts about its future revenue growth, Mark Zuckerberg and his staff know that this is the primary point of discussion that they will have to address during their earnings call. The street is projecting that FB will see an increase of earnings compared with last years’ second quarter, however, the growth rate of new users has been steadily declining.

I am curious to see what role Zuckerberg will play in the conference. Investors are hoping that he will take the lead to project confidence in the company, but I have a feeling that the conference will most likely be led by one of his lieutenants.

There has been talk around having Facebook opening membership up to kids (currently FB requires that its members are of 13 years of age). Having kids be able to sign up for FB would allow potential revenue streams that come from playing games that require spending money on virtual items, a strategy that has been successful for companies like Zynga.

This strategy sounds like it could have potential to boost revenues, however, it seems like any potential cash flows are expected to be minimum and does not represent a significant move in strategy for long term earnings. To me it sounds like FB is using this as a desperation strategy to show potential earning possibilities but does not address a stable platform for revenue growth.

What are you expecting to hear from the FB earnings call? Will FB address the revenue issue that investors are expecting? If there is no realistic substantial projections will the stock price drop? Or has the monetization issue already been priced in? (FB closed at 29.34 on 7/25).

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Comments (37)

 
Jul 26, 2012 - 10:25am

I have no idea what to expect. Honestly, I'd hate to see them ruin an otherwise good business by juicing it for short term returns. Hopefully though, Zuk gets a suit on and acts like a big kid: if he didn't want to go public, he didn't have to, but now that he's here....play the part. Other people's money is on this and it's not about "doing your thing" anymore.

Get busy living
 
Jul 26, 2012 - 11:05am

UFOinsider:
I have no idea what to expect. Honestly, I'd hate to see them ruin an otherwise good business by juicing it for short term returns. Hopefully though, Zuk gets a suit on and acts like a big kid: if he didn't want to go public, he didn't have to, but now that he's here....play the part. Other people's money is on this and it's not about "doing your thing" anymore.

No one in the valley wears suits and a lot of them are running enormous, public companies. His outfit is just fine.

 
Jul 26, 2012 - 11:19am

turtles:
UFOinsider:
I have no idea what to expect. Honestly, I'd hate to see them ruin an otherwise good business by juicing it for short term returns. Hopefully though, Zuk gets a suit on and acts like a big kid: if he didn't want to go public, he didn't have to, but now that he's here....play the part. Other people's money is on this and it's not about "doing your thing" anymore.

No one in the valley wears suits and a lot of them are running enormous, public companies. His outfit is just fine.

True. What I'm getting at is that instead of showing total disregard for any norms, it would be good if he took his new role more seriously.

Or maybe I'm thinking like the herd? He's done just fine so far, why mess with success?

Get busy living
 
Jul 26, 2012 - 7:10pm

UFOinsider:
I have no idea what to expect. Honestly, I'd hate to see them ruin an otherwise good business by juicing it for short term returns. Hopefully though, Zuk gets a suit on and acts like a big kid: if he didn't want to go public, he didn't have to, but now that he's here....play the part. Other people's money is on this and it's not about "doing your thing" anymore.

Zuck didn't want to go public, he had to.

My name is Nicky, but you can call me Dre.
 
Jul 26, 2012 - 4:23pm

Oh Patty, at least you'll get paid from the conference.

The answer to your question is 1) network 2) get involved 3) beef up your resume 4) repeat -happypantsmcgee WSO is not your personal search function.
 
Jul 26, 2012 - 6:26pm

bfin:
Oh Patty, at least you'll get paid from the conference.

WRONG - We're going all out bfin. try break even! :-)

BUT, I did just get paid for my puts, a lot, assuming I get out early tomorrow AM....

I'm still shocked after that earnings call that the stock is above $23.50 after market...really think this thing needs to get to $22, but I'm out...2nd time I've played puts on FB, 2nd time it's worked.

I told Uncle Eddie over gchat, if this thing refuses to drop below $23 tomorrow, I am selling my Aug puts and reloading with some December puts.

 
Jul 26, 2012 - 4:35pm

I'm going to use this as my public forum for the following things:

Unloading an overweight Deckers position after a 25% jump, and top ticking the entire fucking thing.
Being the proud owner of the 2012 "I Told You So" World Championship Trophy
Feeling that much better about my $15 FB puts
Being absolutely jealous and happy for Patrick sacking up and buying $26s. Well played, sir.

For the record, IMO stock-based compensation is no different than cash compensation unless you're a creditor.

I hate victims who respect their executioners
 
Jul 26, 2012 - 6:31pm

BlackHat:
I'm going to use this as my public forum for the following things:

Unloading an overweight Deckers position after a 25% jump, and top ticking the entire fucking thing.
Being the proud owner of the 2012 "I Told You So" World Championship Trophy
Feeling that much better about my $15 FB puts
Being absolutely jealous and happy for Patrick sacking up and buying $26s. Well played, sir.

For the record, IMO stock-based compensation is no different than cash compensation unless you're a creditor.

I'm going out to San Diego in 2 weeks to sit down with DECK mgmt. seeing this pop is killing me right now.

 
Jul 26, 2012 - 6:56pm

DontMakeMeShortYou:
BlackHat:
I'm going to use this as my public forum for the following things:

Unloading an overweight Deckers position after a 25% jump, and top ticking the entire fucking thing.
Being the proud owner of the 2012 "I Told You So" World Championship Trophy
Feeling that much better about my $15 FB puts
Being absolutely jealous and happy for Patrick sacking up and buying $26s. Well played, sir.

For the record, IMO stock-based compensation is no different than cash compensation unless you're a creditor.

I'm going out to San Diego in 2 weeks to sit down with DECK mgmt. seeing this pop is killing me right now.

I was the reason this thing couldn't get over $50 AH, I unloaded everything... but now feeling a little bit of seller's remorse thinking it might get squeezed tomorrow. So hard to judge but I should probably stop thinking about it before I do something stupid...

I hate victims who respect their executioners
 
Jul 26, 2012 - 7:06pm

~24% of float short. Take into consideration that 20%+ is very sticky money... going to get squeezed to high hell tm. I hadn't done enough work on the name to get in before the Q. Hate missing out on these opportunities. Think it goes well into 50+ territory earlier in the day before settling right around that mark by close.

Had a long position + calls on PHM though, so I'm still leaving today a happy camper

 
Jul 26, 2012 - 8:39pm

marcellus_wallace:
Simple do you think Zuck is the next Steve Jobs or not?
I am with Patrick though, at below $20 this is a buy if at all you believe in the entrepreneur mind. $38 was lunancy but at $15 it becomes reasonable value.

Yeah, I'd go long at $15....maybe at $16.

Was talking to eddie about how to structure this trade. How would you structure it so that over the next YEAR, if FB trades between $35 and $24 you lose nothing, but if it goes above $35 you start getting crushed and if it drops below $24 you start making bank....I'd make that trade since I still think there is more chance it hits $18 before in next yr before it hits $35 again...

 
Aug 16, 2012 - 7:46pm

WallStreetOasis.com:

Was talking to eddie about how to structure this trade. How would you structure it so that over the next YEAR, if FB trades between $35 and $24 you lose nothing, but if it goes above $35 you start getting crushed and if it drops below $24 you start making bank....I'd make that trade since I still think there is more chance it hits $18 before in next yr before it hits $35 again...

I wish I would have seen this post earlier. I'm assuming the stock was trading for about 30 when you wrote this post? If so, you could have sold a 35 call to finance a long 24 put. Assuming they were about the same price (they should be if the price was about 30), you gain or lose little to nothing between 24 and 35, make bank below 24, and start losing above 35. You just need to make sure your account is set up for naked call writing. Options on FB are trading out to Jan 2014, they already have 3 strike puts out there. You can PM me with stuff like this in the future if you want. In the meantime, nice trade.

 
Jul 27, 2012 - 9:22am
The answer to your question is 1) network 2) get involved 3) beef up your resume 4) repeat -happypantsmcgee WSO is not your personal search function.
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