Facebook.com Inc. (FB), Groupon (GRPN) and Yahoo Inc. (YHOO) are all under pressure, to varying degrees and for different reasons. Facebook shares trended lower today after the company updated its privacy policies to include sharing users’ information to third-parties. Groupon got hammered after it guided below analyst estimates for the second quarter. And Yahoo fell after more details emerged about Alibaba’s upcoming IPO.
One of these stocks is an A-rated Strong buy, so today presents a fantastic buying opportunity. One is a B-rated (cautious) buy, so more aggressive investors may want to buy in. And one is a hold—while I wouldn’t get caught up in the selling action, current shareholders may want to prepare to sell on a bounce. Which is which? Find out now.
We’ve all heard of facebook.com—the social networking website with 1.23 billion monthly active users around the world. Facebook Inc. was founded in 2004 by former Harvard University student Mark Zuckerberg. After the site experienced a meteoric rise in popularity over the next eight years, the company went public in February 2012. After a rocky start, it appears that Facebook has finally found its fotting.
B: Yahoo Inc. (YHOO)
Yahoo! Inc. is one of the world’s largest internet corporations. With nearly 12,000 employees and operations in 25 countries, Yahoo is widely recognized for its web portal, search engine and email service. This stock is a testament to how quickly new opportunities can open up in the tech sector. In the weeks since I last covered YHOO in the Stock of the Day and the blog, the stock has improved in Portfolio Grader due to strong fundamentals.
While the Alibaba IPO valuation fell short of some expectations, Yahoo still looks good over the long term. Yahoo is growing its core businesses, rather than strictly relying on the strength of Alibaba (which Yahoo has a 24% stake in). Next quarter, Yahoo is headed towards 8.6% annual bottom-line growth. And the following quarter Yahoo is expected to see 20.6% earnings growth. But in the past few weeks we’ve seen significant analyst earnings revisions so these numbers could continue to rise. YHOO is a B-rated Buy. YHOO is a Buy.
C: Groupon Inc. (GRPN)
Groupon (whose name was taken from "Group" and "coupon") functions as a deal-of-the-day website that coordinates with businesses of all sizes to sell discounted tickets and vouchers for various services. Groupon usually keeps half of the money the customer pays for a coupon while the original company benefits from a risk-free way to promote its product. What started as a pet project with $1 million in seed money back in 2008 has grown into a multi-billion-dollar business.
Unfortunately, Groupon disappointed investors in its latest earnings announcement. While the company reported 26% annual sales growth, higher costs weighed on the company’s bottom line. And looking ahead to the second quarter, the company expects $0.00 to $0.02 EPS on revenues between $725 million and $775 million. This is below analysts’ estimates of $0.03 EPS for the second quarter. GRPN shares plunged 21% today on the news. I’d recommend holding your GRPN shares for now—refrain from buying or selling at this time.