Why is This Analyst Predicting Facebook DOOMSDAY?
Facebook’s (NASDAQ:FB) stock has not given its investors a lot of reason for optimism, but one hedge fund manager is putting his predictions for the company in the extreme category. Ironfire Capital’s Eric Jackson said on Monday that he thought the social network had no future beyond the next few years.
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“In five to eight years they are going to disappear in the way that Yahoo (NASDAQ:YHOO) has disappeared,” Jackson told the CNBC’s Squawk on the Street on Monday. “Yahoo is still making money, it’s still profitable, still has 13,000 employees working for it, but it’s 10 percent of the value that it was at the height of 2000,” he said. “For all intents and purposes, it’s disappeared.”
To assert his point, Jackson stuck to the one point that has even Facebook worried on record. The company said in a filing just before its initial public offering last month that it was concerned about developing its mobile strategy and was still figuring out ways to monetize it. That statement has since been held up as a major reason for some big investors deciding not to buy into the talked-about stock.
Jackson insisted that Facebook would struggle to adapt to the mobile shift. “The world is moving faster, it’s getting more competitive, not less,” he said. “Facebook can buy a bunch of mobile companies, but they are still a big, fat website and that’s different from a mobile app.”
Facebook bought mobile photo-sharing app Instagram in April before going public, and has since invested in other properties that are widely thought of as investments for growth on the mobile platform. However, many analysts are choosing to wait it out and watch how the company uses its acquisitions before raising their hopes.
On Monday, Bernstein Research launched its coverage of the stock with an Underperform rating and a $25 price target, way below Facebook’s offering price of $38. The company’s shares closed on Monday at $26.90.
According to Jackson, there are three clear generations of modern Internet companies, the first of which developed the web, the second social networking, and the third is leveraging mobile. He puts Facebook firmly in the second — clear that there will not be a substantial enough overlap with the third.
“When you look over these three generations, no matter how successful you are in one generation, you don’t seem to be able to translate that into success in the second generation, no matter how much money you have in the bank, no matter how many smart PhDs you have working for you,” he said.
Jackson puts Google (NASDAQ:GOOG) and Yahoo in the first category. “Look at how Google has struggled moving into social, and I think Facebook is going to have the same kind of challenges moving into mobile.”
Investing Insights: Wall Street Watch: Google BUYS Users, GM CONQUERING China.