Why Can’t Wall Street Get Behind Facebook Inc (FB)?

Ryan Tate of Wired wrote an interesting piece yesterday asking a simple question, “Why does Wall Street hate Facebook?” The article asked a number of interesting questions and laid out a number of possible reasons. Surprisingly, none of which included the fact that their CEO is viewed by many as a smug little man without sufficient experience to lead the company.

Unlike Steve Job’s black turtleneck, Zuckerberg’s hoodie doesn’t seem to illicit the same amount of confidence.

Why Can't Wall Street Get Behind Facebook Inc (FB)?

Facebook Shares Fell:

Inexplicably, Facebook Inc (NASDAQ:FB) shares fell to a six-month low last week, but if you were to look at the headlines on the day of the drop you would be hard pressed to explain why the stock headed south. Facebook has largely been receiving positive press in recent weeks but its stock stays mired below mediocrity.

Facebook Gets a Pair of Upgrades; Shares Rise,” reported The Wall Street Journal. “Facebook shares jump,” said Reuters following the stock’s drop. While these reports returned the losses suffered, its clear that there is a concerted effort by a few banks to keep the stock down.

Facebook Quarterly Earnings:

Recently Facebook Inc (NASDAQ:FB) reported better than expected quarterly earnings due to its mobile ad sales of $1.9 billion in the first year alone, but this failed to give the stock the jump that many believe it deserves. In the prior quarters reporting in January, they did an even better job of exceeding analysts’ expectations and not only did the stock fail to rise, it dropped.

Wall Street Bearish On Facebook:

Why is The Street so bearish on Facebook Inc (NASDAQ:FB) especially given that video ads will be making their debut in July?

Mr. Tate has his ideas, and outlined them yesterday:

  • Facebook has gone on a recent hiring binge, driving up costs nearly 50 percent with no expected revenue jump even close to that.
  • Facebook’s new features like Open Graph and Home are nowhere near turning a profit.
  • Facebook Inc (NASDAQ:FB) has failed to truly bring inventive advertising to either its site or its mobile applications. For many, Facebook was expected to offer truly unique advertising that could only be done on Facebook. Instead, their advertising has grown stale and similar to existing conventional advertising.

Whatever the reason, there is no denying the Street’s reluctance to back Facebook Inc (NASDAQ:FB), something that the company has never really bothered itself with in years of criticism.