1. FACEBOOK
(NASDAQ:FB)
Analyst Report by: Luke Robinson

2.  Price = $94.14
 Market Cap = $265B
 52 week range: 70.32 – 99.24
 Volume = 27,306,800
 50 DMA = $89.64
 200 DMA = $82.30
 Trading above both MAs
 Beta = 0.66
 Easy to borrow (GC)
 Short Interest Ratio = 1.08%
Stock Summary

3.  Overvalued
 Overbought
 Has just passed titans Wal-Mart, GE, and JPMorgan in
market cap
Valuation
FB LNKD TWTR GOOG Industry
P/E 95.93 56.85 88.66 29.48 38.78
P/B 14.45 6.14 4.51 22.17 2.77
P/FCF 182.52 476.81 3.87 138.41 35.88
PEG 1.58 2.35 1.46 1.20 1.08
P/S 19.55 9.70 10.4 6.16 3.67
ROE 10.36% -3.20% -16.50% 13.86% 11.90%
Prof Margin 14.45% -6.67% -38.32% 21.79% 17.90%

4.  Expected growth in the industry anticipates increased
competition
 46 BUYs, 6 HOLDs, and 1 SELL rating seems bubble-like
 Bearish on the equities market, believe we are due for a
10% correction, although FB has a Beta<1, inflated equities
like FB will fall the hardest
 According to the WSJ the equity market’s short interest is
the highest it’s been since Dec 2012
 This market hasn’t seen a rate hike in almost 10 years
Growth Rate
FB Industry
Current Quarter 11.90% 14.80%
Next Quarter 16.30% 29.90%
This Year 13.60% 16.90%

5.  76% of Facebook’s ad revenue comes from mobile ads,
up from 69% last quarter, lacks diversification
 Facebook has seen its share of U.S consumer time spent
on Android and iOS devices fall from 18% in 2013 to 17%
this year
 Popularity could be diluted from the growing number of
apps available
 FB business model/social media in general is a fad and
subject to swift change in the tech/media industry
 Payment revenue expected to take a hit, due to a decline
in usage of FB on personal computers
Mobile Ad Revenue/FAD

6.  Although insiders do hold large long positions, many have been
selling into the FB rally over the past 3 months
 Colin Stretch (VP/GC) sold 5,265 shares @ $90.39
 Christopher Cox (CPO) sold 37,218 shares @ $90.70-90.31
 Michael Schroepfer (CTO) sold 31,284 shares @ $90.76-90.34
 Jas Athwal (CAO) sold 1,946 shares @ $90.40
 Sheryl Sandberg (COO) sold 39,105 shares @ $90.68-90.31,
holds 20,300 long
Insider Transactions

7.  Putting position
on pre-FB earnings
@ $95.29 on
07/29/2015
 Bollinger Bands
 Broke resistance
and came back
in, look for swing
downward
 (RSI)
 FB seems
overbought at a
62 RSI
Technical
Analysis

8.  Missed earnings for
Q1, beat Q2
 FB had beat for the
past 10 quarters
 Analysts say FB
must shatter
expectations
 In earnings reports:
 FB blamed
weakening
EUR/USD for
missed revenue
 Look for EUR/USD
with a sharp move
to parity
 FED tightening,
ECB and Central
Banks easing will
boost the USD
 Bearish EUR/USD
EUR/USD

9.  Overvalued, bearish in the short term
 $100 could be a psychological level, all-time high is $99
 Competition, only takes one, remember Blackberry
 EUR/USD
 FB expects to penetrate EM for revenue as its US market
matures
 Bearish on EM from the downside move in commodities
 Bullish USD, could hurt FB revenue and profits
 College population, whom FB was originally created for, is
losing their taste in the brand
 How does FB monetize its recent acquisitions, given the
heavy emphasis on mobile ad revenue?
 How does one go about valuing FB and its assets?
Headwinds

10.  Stock is trading at an incredible premium to the rest of the
industry, has lost fundamentals and is riding momentum
 Earnings caused skittish sentiment
 The stock is in uncharted territory
 Lower ROE/profit margin than the industry
 Expectations too high, price targets from analysts to $146,
$125, $118, $115, etc.
 Passed market caps of Wal-Mart, GE, and JPMorgan
 FB has little competition to compare itself to in regards to
valuation, this move in such a company is unprecedented
 Tech vulnerable to turn around/obsolete offerings
 Cover on the swing after earnings at $91.50
SELL Rating