Today: Facebook introduces a new e-commerce option one day after its earnings report, and stock turns around. Also: Apple's (AAPL) tablet market share falls below 50 percent as mobile device sales hit record, and Wall Street finishes off successful January.
Facebook stock rebounds from intraday doldrums as new e-commerce offering announced
Facebook's stock price slipped Thursday morning as analysts downgraded the company following its earnings report, but shares turned around after the Menlo Park social network announced a new e-commerce offering that translates to the real world.
Facebook's newest offering is a gift card that will be part of Facebook Gifts, the e-commerce unit that excited investors and analysts when the revenue-generating plan was originally announced in September. Users who purchase or receive a Facebook card as a gift will receive an actual physical card in the mail emblazoned with the Facebook logo; the card can then receive additional amounts for different retailers, either from the user adding funds or gifts.
The effort is starting small, with just four partners in brick-and-mortar retail signing on -- Target, Sephora, Olive Garden and Jamba Juice. The card can hold balances for multiple partners at the same time, and it seems likely that Facebook would seek to expand the program to other retailers, though it did not mention future plans in the blog post announcing the feature Thursday. It is pushing digital Starbucks cards as birthday gifts in a separate effort, Business Insider reported.
Before the blog post announcing its new gift card Thursday, Facebook stock was struggling in the wake of Wednesday's earnings report, falling as low as $28.74, a decline of 8 percent from Wednesday's closing price. However, the price steadily built back up during the day, even moving into the black late in the session before falling back; shares closed at $30.98 after a daily decline of 0.8 percent.
The small stock decline does not mean Facebook is out of the woods, however: Several analysts downgraded the stock after its earnings report, despite Facebook's ability to show more meaningful growth in mobile usage and monetization. At least five analysts who cover the stock cut their ratings Thursday on Facebook, according to Eric Savitz at Forbes, with the most common reason being Facebook's heavy spending, which will decrease the company's gross margin.
"We are downgrading ... as management warns of significantly higher expense levels in 2013 as a result of aggressive hiring and investment plans," Jefferies analysts Britz Pitz and Brian Fitzgerald wrote in their note, explaining that the heavy investment sets the company up well for a long-term investment, but hurts any near-term successes.
Other notes followed a similar theme of concern for earnings in 2013 due to Facebook's outsized spending habits, but belief that the long-term path for Facebook is solid. "We view FB as a core long-term 'Net stock," Citigroup analyst Neil Doshi wrote. "But with plans to invest heavily in the biz in 2013, and little expected contribution from new initiatives like Gifts or Graph Search, we don't see any near-term catalysts for the stock."
Other analysts maintained their "Buy" or equivalent ratings on Facebook stock, citing the company's efforts to drive into mobile advertising, a potentially lucrative field that does not truly have a dominant player as of yet.
"We believe the decision (to invest heavily in the business) is appropriate, as the immense mobile advertising opportunity remains largely unclaimed," Wedbush Securities analyst Michael Pachter wrote. Topeka Capital analyst Victor Anthony agreed, saying Facebook "will continue to be one of the primary beneficiaries of the secular ad shift from traditional media to the Internet/mobile."
The upturn in Facebook's stock price during the session showed that investors were listening and understand that Facebook is a strong long-term investment, Macquarie Research analyst Ben Schachter told Reuters.
"The more people thought about it throughout the day, the momentum changed and longer-term investors won out, saying these are investments we think they should be making," he said.
Tablet shipments break record, but Apple market share continues to slip
The opportunity in the mobile field was highlighted by an IDC report Thursday that said tablet sales set a record in the final three months of 2012, as holiday gift-buyers went nuts for the mobile devices. The news was not so great for Apple, however: While the company sold a record amount of iPads in the quarter, IDC reported that the company's market share dipped as Samsung and other companies stepped up to the challenge.
The quarterly tablet sales report from IDC showed that vendors shipped 52.5 million tablets in the fourth quarter of 2012, a whopping 75.3 percent increase from the same period in 2011. While Apple was still easily the leader in the field and saw its shipments increase by 48.1 percent, its growth rate was puny compared with Samsung and Asus, which shipped 263 percent and 402.3 percent more tablets, respectively.
"New product launches from the category's top vendors, as well as new entrant Microsoft, led to a surge in consumer interest and very robust shipments totals during the holiday season," IDC's research director for tablets, Tom Mainelli, said in Thursday's news release. "The record-breaking quarter stands in stark contrast to the PC market, which saw shipments decline during the quarter for the first time in more than five years."
Its competitors' rapid growth pushed Apple's market share down from 51.7 percent in the 2011 holiday quarter to 43.6 percent for 2012, after barely capturing the majority of tablet sales in the third quarter. While there were signs Thursday that Apple is nearing a new entry, an iPad Mini with Retina display, the rapid growth for other tablet manufacturers could signal that Apple's extreme dominance in the category may be done, replaced simply by normal dominance.
Apple stock slipped 0.3 percent Thursday to close at $455.49 as it failed in another bid for a sales ban on Samsung products. The decline completed a January that saw the most valuable company in the United States post the worst performance in the Standard & Poor's 500 index.
Wall Street slows down at end of profitable January for investors
While Apple underperformed in January, the markets had their best opening month to a year since 1997, as the S&P 500 had its largest gain in a single month since October 2011. Thursday's trading wasn't representative of the rest of the month, however, as indexes either fell or stayed flat ahead of Friday's release of the monthly jobs report from the federal government.
Tech stocks held up well, as the tech-heavy Nasdaq and SV150 stock indexes outperformed the Dow Jones and S&P 500. Electronic Arts (ERTS) gained 4.3 percent after announcing earnings Wednesday that were not great, but still managed to exceed Wall Street's lowered expectations for profits. Zynga continued to have an extremely volatile week with a gain of 7.1 percent; the stock gained 14.1 percent Monday, then dropped 8.5 percent Tuesday and 2.7 percent Wednesday.
On the negative side, Intel (INTC) dropped 1.5 percent after showing off a smartphone it helped develop for the Asian market, part of the Santa Clara chipmaker's late attempt to break into the mobile market. Mountain View security software maker Symantec lost 1 percent as it had to defend its products following the high-profile hacking of the New York Times, a Symantec client.
In Thursday's earnings reports, San Mateo software company NetSuite continued to report losses, but a surge in sales pushed the company stock up more than 7 percent in after-hours trading; and Mountain View audio chip maker Audience skyrocketed more than 20 percent higher after its earnings report, which came just days after the stock was the target of a Twitter hoax.
Silicon Valley tech stocks
The tech-heavy Nasdaq composite index: Down 0.18, or 0.01 percent, to 3,142.13
The blue chip Dow Jones industrial average: Down 49.84, or 0.36 percent, to 13,860.58
And the widely watched Standard & Poor's 500 index: Down 3.85, or 0.26 percent, to 1,498.11
Check in weekday afternoons for the 60-Second Business Break, a summary of news from Mercury News staff writers, The Associated Press, Bloomberg News and other wire services. Contact Jeremy C. Owens at 408-920-5876; follow him at Twitter.com/mercbizbreak.