Out Fox The $treet

Facebook set 2018 targets so low that the company has an easy hurdle in 2019. EPS estimates are already starting to trend higher, and the stock is following. The company will lower expense growth estimates throughout this year. A focus on family DAUs will provide support for long-term revenue growth. The stock trades at about 18x ultimate '19 EPS estimates of $8. Though   Facebook   ( FB ) continued to collapse with the market correction leading to the Christmas Eve massacre where the stock dipped to $123, the company set the seeds for a bottom in early December. The large stock buyback and an   altered DNA   has the company positioned for a better 2019 while the market is busy looking backward at the adjustments already made by CEO Mark Zuckerberg. Read the full article on Seeking Alpha.  Disclosure: Long TWTR. Please review the disclaimer page for more details.   

Facebook continues to face a very negative news flow. Users deleting Facebook appears to have already peaked. The EPS trend has started heading back up. An additional $9 billion stock buyback authorization helps shift investor sentiment back positive. When a stock quits going down on negative news, the stock has probably hit the lows.  Facebook  ( FB ) finds itself in that position with an ongoing negative news flow and a stock that has rallied off the November 19 low and held in the face of a another market selloff. My  investment thesis  was negative on the stock when $150 didn't hold, but the thesis is shifting back bullish here below $140. Read the full article at Seeking Alpha. 

Snap reported another quarter of declining users. Industry surveys continue to show Instagram successfully take market share and killing all momentum in Snapchat. The company is burning far too much cash to play any turnaround story. The  quarterly results  for  Snap  ( SNAP ) were so bad that my recently issued  price target of $5  now appears aggressive. The original story of out-of-control spending has been replaced by active user declines. The social-messaging platform won't have a rewarding future based on projected user declines. Read the full article on Seeking Alpha. Update 11/15 Don't place a lot of thought into the DOJ and SEC subpoenas regarding the IPO. The company disclosed the large cash flow losses that are leading to the problems with stock now. Shareholders in the lawsuits against the company apparently can't read a prospectus. Regardless, the stock should still head below $5. Disclosure: No position mentioned. Please ...

Facebook smashed Q3 EPS estimates as analysts likely overcorrected on cost estimates. The social networking platform still faces significant margin pressure in 2019. 2019 analyst estimates still need to contract before investors can get an all-clear on the stock at the $150 level. Prior to its  Q3 earnings report , my  investment thesis  on  Facebook (NASDAQ: FB ) was focused on the double hits the company was taking for the same issues. The thesis further supported that the social networking giant was likely to beat estimates, as costs failed to materialize as projected. The stock is a Buy with a $150 reference point as soon as analysts lower EPS estimates for 2019. Read the full article on Seeking Alpha. 

Snap continues to face incredible competition from Instagram that even challenges the dominance in the under 18 crowd. The stock currently trades at a higher EV/S multiple in comparison to dominant peers. Snap price target lowered from $7 to $5. As   Snap   ( SNAP ) falls to new lows, investors need to understand that the stock doesn't offer any value. This isn't a stock to buy on dips other than for a quick dead-cat bounce. My   previous target   of $7 is lowered to $5 for a market valuation of roughly $7 billion. Read the full article on Seeking Alpha.  Disclosure: Long TWTR. Please review the disclaimer page for more details.   

eMarketer predicts that Facebook (FB) will actually lose users in the under 24 age group this year. And the social networking giant isn't losing small amounts.

Snap reported improving revenue and user trends, but investors need to dig further into the financials. The company hasn't figured out a way to reduce cash burn to acceptable levels. The stock trades at a wild multiple of sales with the stock now worth nearly $30 billion. Investors need to be careful following the analyst crowd. Snap  ( SNAP ) surged nearly 50% the day following  Q4 results  that beat analyst estimates. The important numbers though showed no significant improvements warranting a sudden positive change of opinion in the stock suggesting that investors need to hit the brakes on this rally. Read the full article on Seeking Alpha.  Disclosure: No position mentioned. Please review the disclaimer page for more details. 

New report shows Snap has an exclusive user base. Snap must prove the business model though plenty of revenue upside exists with monetizing existing user base. Valuation is extremely stretched despite the opportunity to grow revenues due to unconstrained operating expenses. A new report backs the thesis that  Snap  ( SNAP ) has compelling user engagement that remains sticky. Unfortunately, user engagement is only one part of an investable business model that  my research  has questioned since the IPO. Read the full article on Seeking Alpha.  Disclosure: Long TWTR. Please review the disclaimer page for more details. 

Facebook provided Congress with data on Russian accounts that advertised on the platform. The scope and impact of the Russian ads are very minimal. The costs of additional ad reviewers is easily absorbed by the platform. Facebook  (NASDAQ: FB ) continues to face government and potentially regulatory pressure from allowing Russian ads that attempted to influence the 2016 U.S. elections. The stock has struggled to gain momentum in the last couple of months, making one question whether trouble is looming ahead. Read the full article on Seeking Alpha.  Disclosure: No position. Please review the disclaimer page for more details. 

Summary Citigroup analysts assigned a $35 billion valuation to Instagram that is only now monetizing the user base. Instagram and Twitter have comparable logged-in user bases, though the former is growing faster. Twitter is significantly ahead of Instagram on the monetization path, and provides an attractive valuation compared to Instagram that is part of the significantly larger Facebook. The absurdity of a $35 billion valuation on a company division that is barely producing revenue is comical, but that is the valuation assigned to Instagram by a Citigroup analyst. The market and especially investors in Facebook (NASDAQ: FB ) that bought the social picture sharing service for $1 billion were initially excited about that news. Clearly, Facebook got a great deal at the $1 billion valuation, but investors need to wise up to the proclaimed valuation. Read the full article at Seeking Alpha. Disclosure: Long TWTR via GSVC. Please rev...

With more signs that the younger generation is fleeing Facebook ( FB ), including the recent UK study suggesting the leading social site is already dead to teens across the pond, it might be time to consider the proper valuation as Facebook becomes an Internet utility. Sure it has Instagram that is still hip, but in the social media sector it seems all but inevitable that a utility type service is the future for Facebook. The good news is that the future could provide the next Yahoo ( YHOO ) , while the downside is always lined with the remains of MySpace and others. Read the full article at Seeking Alpha. Disclosure: Short FB. Please review the disclaimer page for more details. 

Every research firm and data analysis over the last couple of months suggested that Facebook ( FB ) is losing users especially amongst the younger generation. Reading the Q113 earnings call transcript , one gets the impression that the company has unlimited user growth ahead and no issue with the teen crowd. Why does such a dramatic dichotomy exist in the market? While Facebook remains the dominant leader in social media, sources from Piper Jaffray analyst Gene Munster to SocialBakers suggests that the younger generation and especially teens are quickly moving on from the site to Twitter or other social outlets. The company is desperately attempting to address the issue via numerous new products that aren't attracting enough revenue to exceed the cost of the products. Read the full article at Seeking Alpha. Disclosure: No positions mentioned. Please review the disclaimer page for more details. 

Right Mix Marketing provided the below infographic that highlights the move of teens to new social networks. The damaging part to the Facebook valuation is the concept that parents have joined the social network in order to track teens. In essence, not only does this push the teens to another service, but it also suggests the parents aren't solid users either. This news fits our thesis that Facebook will have a very difficult time justifying the $61B valuation. Clearly it is a valuable social network that will maintain millions if not billions of users for a long time. The company can grow revenue while losing North American users as it becomes more efficient. The problem over the next few years is that the domestic user base could be much smaller and those are the users that are worth the most. In our opinion, it doesn't justify the current $61B valuation. Even at $20B, Facebook would be one of the largest companies in the world and trade at 3x revenue. Disclos...

A couple of news items were released last Thursday that highlighted the short thesis in Facebook (FB) . First, the company released news regarding hitting 1B monthly active users (MAU). Though initially sounding bullish, the number highlights the slowing growth trajectory. Second, Zynga (ZNGA) warned of reduced growth going forward, suggesting a considerable reduction in Facebook-related revenue and usage. Also last week, CEO Mark Zuckerburg made the media circles with an appearance with Matt Lauer on NBC and a Businessweek interview. The interesting take away from both interviews was the focus on MAU. For some reason, these media outlets didn't press the issue on the reduction in usage reported by comScore or the lack of focus on daily active users (DAU). Read the full article at Seeking Alpha. Disclosure: Short FB. Please review the disclaimer page for more details. 

Facebook (FB) COO, Sheryl Sandborg, had an interesting interview on CNBC today. The comments about monetizing mobile traffic is definitely positive for the stock. My biggest concern remains that all of the conversation regards monetizing traffic instead of solving the traffic problem. Anybody interested can read the summary by Julia Boorstin at mediamoney.cnbc.com . Below is one of the segmentss posted on CNBC: The interview does discuss growing users and engagement, but at no point does it address the declining traffic. The analysts made some interesting points regarding the 30% drop in desktop traffic for the 12-17 year old crowd. With that crowd leaving, it means the future college crowd will be gone as well if it isn't already. As discussed in our SA article , the comScore stats were very discouraging for a company with a $43B market cap. Long investors need to be careful. Disclsoure: No position mentioned, but might short FB within the next 72 hours....

Myspace recently launched the below video in hopes of attracting interest in its re-launch. Will the website be successful in connecting back with the younger, artistic crowd that it enjoyed until Facebook (FB) came along? Myspace appears to retain the more hip option for users disappointed with the more bland style of Facebook. The biggest hope for Myspace is reconnecting with the younger crowd looking for a place to hang out with friends and away from their parents and grandparents that now reside on Facebook. Probably a long shot to re-build a brand in the social networking world, but it sure doesn't hurt to have Justin Timberlake on your side. Whether successful or not it will undoubtedly contribute to the declining traffic at Facebook. Even 5% of users shifting time back to Myspace could just be a killer for the once dominant player. Disclosure: Short small position in FB. Please review the disclaimer page for more details.