Facebook (NASDAQ:FB) is not only a great American success story, it’s also a company that attracts some serious black clouds. In the past, these clouds took the form of lawsuits from the Winklevoss brothers and Mark Zuckerberg’s co-founder Eduardo Saverin. However, as the late Biggie Smalls said, “More money, more problems.”
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Facebook’s new dark clouds are worrisome for investors. Our CHEAT SHEET investing framework always starts with a requirement for a “C = Catalyst for a Stockʼs Movement“. In the case of Facebook, the strongest catalysts on the horizon are negative. Let’s take a look:
1) FTC inquiries into the billion dollar Instagram deal;
2) SEC inquiries into IPO shenanigans involving Morgan Stanley (NYSE:MS) and Goldman Sachs (NYSE:GS);
3) Shareholder lawsuits over IPO shenanigans;
4) Slowing growth in the latest earnings announcement;
5) Major problems monetizing the user-base;
6) An alleged move away from core competencies into the highly risky smartphone hardware space;
7) Core gaming partner Zynga (NASDAQ:ZNGA) is diversifying away from the Facebook platform;
8) Increasing competition from Google+ (NASDAQ:GOOG), Path, Pinterest, and many more niche social networks.
In addition to these major issues facing the company, Facebook’s stock is highly valued and currently not discounting all these negative catalysts. Am I missing other negative catalysts? If so, please let me know in the comments below.
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