Facebook shares will be unable to sustain the 4.8 percent rally they enjoyed Wednesday, says Todd Schoenberger, managing principal of The BlackBay Group, a financial advisory firm.
Facebook’s fundamentals aren’t strong, he tells Yahoo.
After a period of hyper growth, the year-over-year increase of unique users has dropped to 5 percent, Schoenberger says.
Editor's Note: The ‘Unthinkable’ Could Happen — Wall Street Journal. Prepare for Meltdown
“That’s a sign they’re slowing down.”
In addition, the company hasn’t been able to generate much advertising on mobile devices.
“It [the stock] is not a bottom right now,” Schoenberger says. “You’re going to have some suckers that get into this stock.”
For example, Facebook shares surged Wednesday after news that the company cancelled plans to sell 101 million shares to pay taxes and that CEO Mark Zuckerberg won’t sell more stock for at least a year.
Schoenberger is unimpressed with Zuckerberg. “You have a CEO who’s not doing anything,” he says. “He’s wearing the hoodies.”
Investors should resist the temptation to take a flyer on Facebook, Schoenberger says. "You’re going to take on 75 percent more risk for a possible 25 percent return. It's not worth it. … Stay away from it.
“When it gets down to single digits, that will be your entry point,” he adds.
Not everyone is bearish on Facebook. Analysts at Jeffries just published a glowing report about the company.
“With a potent mix of unprecedented scale, high engagement and social plus behavioral targeting, we think Facebook is must-buy media for marketers as they follow users online,” the analysts write, according to The Wall Street Journal.
Facebook shares closed at $18.58, up $0.85, on Wednesday.
Editor's Note: The ‘Unthinkable’ Could Happen — Wall Street Journal. Prepare for Meltdown
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