Facebook Inc (FB) Vulnerable To Competitor Price Moves


Facebook Inc (NASDAQ:FB)’s share price has fallen nearly 21 percent over the past month amid investors’ confused expectations from the social network’s advertising model.

Facebook Inc (FB) Vulnerable To Competitor Price Moves

April Dembosky and Tim Bradshaw in their report filed with Financial Times feel some of the reasons for Facebook Inc (NASDAQ:FB)’s drop in price could be attributed to flopped product launch, cycle of negative news and investors’ confusion from Facebook Inc (NASDAQ:FB)’s advertising model.

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According to Pivotal Research analyst Brian Wieser, sentiment on Facebook Inc (NASDAQ:FB) is dreadful right now as many investors show disappointment at the social network not reporting doubled growth.

Facebook Stock 

Facebook Inc (NASDAQ:FB)’s stock rose to $28.97 on May 2, as it posted improved first-quarter earnings results thanks to new advertising products showing potential. However the stock price rolled back to the pre-earnings price within two trading days.

The social network’s share price fell during the next few weeks, partly due to negative reports attributable to Facebook Home, which is the social network’s super app for Android platform. Facebook Home is intended to replace a phone’s home-screen with the Facebook Inc (NASDAQ:FB) news feed.

The U.S. carrier AT&T Inc. (NYSE:T) lowered the price of HTC First, which included Facebook Home pre-installed, from $99 to 99 cents. With increased negative feedback from customers, Facebook Inc (NASDAQ:FB) decided on May 23 to indefinitely postpone HTC First’s European release.

Facebook Android Update

However, yesterday, the social network released an update to Facebook for Android that can simultaneously add an application dock to Home. The new feature would facilitate Home users to customize the app launcher by dragging the apps they use the most to a favorites tray. The tweak is an expected addition that is meant to fix one of the most obvious flaws of Facebook Home, viz.: the software package makes it too cumbersome to reach other applications.

Interestingly, Facebook Inc (NASDAQ:FB)’s poor performance in the stock market is attributed to news emanating from other companies. For instance, the social network’s price fell 2 percent on May 20, when Yahoo! Inc. (NASDAQ:YHOO) officially announced that it bought Tumblr.

Similarly the social network’s stock price fell another 2 percent on June 3, when Zynga Inc (NASDAQ:ZNGA)’s lay off announcement trickled in. The social game services provider Zynga Inc (NASDAQ:ZNGA) struggled to enhance its mobile gaming presence. Zynga Inc (NASDAQ:ZNGA) has also started falling out with Facebook Inc (NASDAQ:FB), which started de-emphasizing Zynga Inc (NASDAQ:ZNGA)’s games over others last November.

Interestingly Facebook’s gaming revenues have shown an increase thanks to its efforts to diversify its gaming partners. On the other hand, Zynga Inc (NASDAQ:ZNGA) posted lower gaming revenue. However investors surprisingly feel both the companies are entwined.

Last week, several major advertisers suspended their marketing on Facebook website because their ads appeared next to offensive posts supporting violence against women. Active women’s groups took screenshots of photos that appeared on Facebook and sent them to leading companies to pull their ads from the site.

Thus April Dembosky and Tim Bradshaw of Financial Times feel the social network’s fall in stock price is not attributable only to its own performance but guided by various other external factors.

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Mani is a Senior Financial Consultant. He has worked in Senior Management role in large banking, financial and information technology organizations. He has provided solutions for major banking and securities firms across the globe in the area of retail, corporate and investment banking. He holds MBA (Finance) and Professional Management Accounting Qualifications. His hobbies are tracking global financial developments and watching sports
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