Facebook Inc (NASDAQ:FB) had a remarkable 2014 with stock rising 43% and surging to an all-time high on December after gaining two-fold in 2013. However, options market is turning bearish on the stock, according to a report from Business Week.
Will Facebook maintain its growth rate?
Over the past two years, the stock has surged miraculously by 195%, and traded at record high last month. However, the options market is turning skeptical on the social networking giant. According to Eurof Uppington of Lombard Odier Investment Managers, Facebook Inc (NASDAQ:FB) is one of the most powerful platform for the advertisers, but it would be challenging for the company to maintain the growth. Uppington said that the market is not expecting Facebook to recreate the same performance it had in 2014.
Uppington said, “It’s also seeing an increase in operating expenses. The company needs to invest in growth to overcome the law of large numbers.” For Facebook, operating expenses surged in the third-quarter at the fastest rate since the first three months on 2013, according to the data compiled by Bloomberg.
Frank N. Magid Associates Inc noted in their report that Facebook’s share among the 13-to-17-year age group in the United States dropped 88% last year from 94% in 2013 and 95% on 2012. During the same period, Twitter and other messaging applications gained popularity among the youngsters as per the study.
Growth, but at slower pace
Analysts expect profit and revenue for the company in 2015 to be slower, and not in line with the growth experienced last year. Earnings for the company are expected to rise 12% this year after almost doubling in 2014, according to the analyst estimates collected by Bloomberg. Sales are estimated to rise 37% after spiking 57% last year, according to the estimates.
However, Ken Sena, an analyst at Evercore ISI believe that the social networking giant has made right moves by expanding into the video advertising, and its scale and product development will allow it to drive the user growth by staying popular among the existing users. Sena has assigned Buy rating to the share with a price target of $95. Also, Facebook Inc (NASDAQ:FB) acquired applications such as Instagram and WhatsApp Inc to expand and lure the younger users and drive mobile advertising sales.