Social Media Sentiment Surrounding Facebook's Earnings Results
The following article is from one of our external contributors. It does not represent the opinion of Benzinga and has not been edited.
This week, Social Market Analytics (SMA) looks at Facebook, Inc. (NASDAQ: FB), the operator of a social networking website enabling users to connect and communicate with each other; advertisers and marketers to engage with its users; and developers to build social networking applications. The week of July 23 was a challenge for Facebook shareholders as the market reacted negatively to the company’s highly anticipated first quarterly earnings report since its IPO. Facebook’s earnings call occurred after the market close on July 26. The company reported EPS of $0.12, in-line with street estimates, and revenues of $1.18 billion, beating estimates by 2.6%. Yet, the stock sold off sharply, ending the week down 38% from its IPO price in May. The decline occurred amid concerns in the analyst community that revenues and user growth are slowing, significantly, and that business models remain immature, even at Facebook, the model of excellence for the new era of social networking, media, and advertising.
During the week, Facebook appeared twice on SMA’s morning Flash Report, which identifies stocks, in the pre-market, with extreme levels of market sentiment that are likely to trade with high activity during the upcoming session. In the pre-market of July 26, SMA's analytics engine identified Facebook as a stock with Extreme Negative sentiment in the universe of stocks tracked by SMA. As the week evolved, SMA’s sentiment metrics provided early indication of negative price trends for Facebook and then confirmation of continued negative market sentiment as traders integrated the results of the company’s quarterly report.
Beginning on July 24, SMA’s S-Score for FB entered a sharp downtrend from Positive into Negative territory. In the pre-market of July 25, Facebook’s S-Score stood at -0.83, down from the firmly positive level of 1.13 seen the previous day. The behavior of SMA’s S-Score measures market trading sentiment and can provide actionable signals for upcoming price movement. The stock opened the July 25 session at $28.39, but ended the day up at $29.34. The change in S-Score trend accelerated in the pre-market of July 26, the day of the earnings call, with Facebook’s S-Score posting a large decline to -3.43 (Extreme Negative), coincident with a 4-fold increase in S-Volume metric indicating unusually high social media activity for the stock. Facebook gapped down at the open to $27.75 and continued to sell off to end trading at $26.85, a decline of 8.48%. The morning of July 27 saw persistent levels of negative sentiment with Facebook’s S-Score at -1.04 (Negative) and continued high levels of S-Volume activity. The stock gaped down at the open to $23.19, attempted to rebound, but closed at $23.73 off 11.7% for the day and at a net loss of 17.4% for the week.
Social Media data are noisy and complex. A single metric is insufficient to understand sentiment behavior over time. Our S-Factors are a family of metrics, including volatility, trend and volume measures, designed to provide a complete view of the social media signature for each security tracked in SMA’s database. SMA's processing engine continuously updates our S-Factors, capturing overnight and pre-market sentiment activities. Clients receive sentiment reports, prior to the U.S. market open, and intra-day sentiment estimatesfor tracked stocks, on-demand. We invite the reader to visit our website; investigate our market sentiment metrics for Facebook, other stocks, industry sectors, and market indices; participate in our FAQ forum; and sign up for our Flash Report and Newsletter.
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