Facebook: The skeptic's view
Facebook's stock rose about 25% off the lows, courtesy of CEO Mark Zuckerberg's crowd-pleasing turn at the TechCrunch Disrupt conference on Sept. 11.
Zuckerberg was in hiding since the company's disastrous May IPO. But at Disrupt, he came out swinging, making the case that Facebook would eventually make more money on mobile platforms than on the desktop.
To date, mobile has been a drag due to a lack of ads, though if you pull out your iPhone and launch Facebook, you'll see that they're starting to pop up - just watch for the word 'Sponsored' in your newsfeed.
Eventually, Facebook will likely make big money from mobile advertising. But investors are behaving as if it's happening right now, even though Zuckerberg gave no indication that this is the case.
Plus, let's look at a mostly-ignored tidbit dropped by COO Sheryl Sandberg during a CNBC interview on Monday:
Anchor Julia Boorstin asked, "Has the new mobile app you launched in August boosted revenue?"
Sandberg's reply was: "The new mobile app is boosting engagement, and engagement always leads to revenue."
This statement is just one reason why I am a Facebook skeptic for the near-term, and why I am betting against the stock.
There is a big, big difference between "engagement" and the actual revenues that investors seem to be expecting. Maybe Sandberg is right - maybe engagement will turn into a mountain of money, and Facebook will prove itself as a great American growth story on the level of an Apple or a Google.
For now, the smart move is to be skeptical.