Popular tech stocks are struggling against a tide of sellers that are collectively poking a hole in the myth that certain sectors aren’t ripe for a bursting bubble.
King Digital Entertainment’s Stock Having Trouble Gaining Traction
For example, King Digital Entertainment Plc’s (NYSE: KING) share value has yet to equal its $22.50 IPO price since it went public a little over a week ago.
On Apr. 7, the stock continued to lose value, with KING closing at $18.35, down 61 cents from its close of $18.96 the previous day.
The chairman and CEO of King Digital Entertainment lost $230 million as a result of the company's weak performance in its first day of public trading, according to a Wealth-X estimate.
Still Early In the Game
Scrambling for reasons to explain the poor showing, some analysts say King’s IPO is weak because the company is a “one-trick pony,” meaning it has no other monster gaming hits to back up Candy Crush when it eventually loses its popularity. However, such early critiques may be unfair and premature. Let’s remember that even such giants as Facebook (NASDAQ:FB) had a rocky start when they first came out of the gate.
Plus, there are more than 180 "game IPs" in King’s Digital library. Candy Crush has proved to be the company's money-maker with 97 million daily active users, according to the IPO prospectus. Candy Crush accounts for 78 percent of King's sales. But King's other popular games include Farm Heroes Saga and Bubble Witch Saga, each of which has fewer than 20 million daily users.
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Facebook to Release First Quarter Results Apr. 23
But the mighty Facebook (NASDAQ:FB) has been an exception to the rule, its stock volume soaring Apr. 7, with 108,487,568 shares changing hands, significantly higher than its three-month average volume of 62,239,613 shares.
The uptick in volume is being fueled in part by the sudden selling spree of tech stocks, but in Facebook’s case its share value is holding its own. The Menlo Park, Calf.-based social-networking giant will release its first quarter 2014 financial results after market close on Wed., Apr. 23, 2014.
Facebook will host a conference call to discuss its results at 2 p.m. PT / 5 p.m. ET the same day.
Facebook’s announced Mar. 25 that it has reached a definitive agreement to acquire Oculus VR Inc., a leader in immersive virtual reality technology, for a total of approximately $2 billion.
This includes $400 million in cash and 23.1 million shares of Facebook common stock (valued at $1.6 billion based on the average closing price of the 20 trading days preceding Mar.21, 2014 of $69.35 per share). The agreement also provides for an additional $300 million earn-out in cash and stock based on the achievement of certain milestones.
According to Facebook, Oculus is the leader in immersive virtual reality technology and has already built strong interest among developers, having received more than 75,000 orders for development kits for the company's virtual reality headset, the Oculus Rift.
While the applications for virtual reality technology beyond gaming are in their nascent stages, several industries are already experimenting with the technology, and Facebook plans to extend Oculus' existing advantage in gaming to new verticals, including communications, media and entertainment, education and other areas. Given these broad potential applications, virtual reality technology is a strong candidate to emerge as the next social and communications platform.
"Mobile is the platform of today, and now we're also getting ready for the platforms of tomorrow," said Facebook founder and CEO, Mark Zuckerberg.
Google Also Interested in Virtual Reality
Facebook is not the only technology giant investing heavily into virtual reality. Google Inc. (NASD: GOOG) is quietly working on a prototype of a phone powered by a special android program that could make smart phones including Apple’s latest versions obsolete.
This might seem fantastical, but all you have to do is read Google’s current presentation on its Tango Project and you’ll see why the company that has it tentacles in every online venture conceivable could be on the verge of another major breakthrough.
What Is It?
First, let me give you a taste of Project Tango’s potential by explaining what it is.
The current prototype is a 5" phone containing customized hardware and software designed to track the full 3D motion of the device, while simultaneously creating a map of the environment.
These sensors allow the phone to make over a quarter million 3D measurements every second, updating its position and orientation in real-time, combining that data into a single 3D model of the space around you.
It will be interesting to see which of these companies find a practical application for virtual reality first.
Of the 33 analysts that cover Facebook, 26 recommend a "strong buy," 4 recommend a "buy" and 3 a "hold."
On Apr. 7, FB’s share price closed at $59.95 cents, up 20 cents from its closing price of $59.75 the previous day.
Twitter Holds Its Own Amid Mini Tech Selloff
Meanwhile, the social networking pioneer Twitter Inc. (NYSE: TWTR) share value on Apr.7 closed at $42.45 down 69 cents from its closing price of $43.14 the previous day, on volume of 12,052,991 shares.
Mini Tech Selloff
The mini tech selloff has hurt Twitter’s share value over the last week. But rumors that it’s about to launch a mobile-advertising product in the weeks ahead that would let app makers download their software should keep the company’s stock value should keep the company’s stock value from a long term downward trend. That’s because the new format for mobile phones would be a real plus for its ads reaching the Millennium demographic.
Such an app-driven ad format would be a big deal for companies looking for repeat business and a younger more affluent marketplace.
So far, Twitter and other popular social networks have yet to prove they can generate income from ads on their platform. Not too long ago, General Motors canceled an expensive ad campaign on Facebook, citing it had proven to be ineffective.
Sirius XM Holding Inc.’s to Release First Quarter Results Apr. 24
Finally, Sirius XM Holdings Inc. (NASDAQ: SIRI) stock volume was robust Apr. 7, with 81,414,256 changing hands, higher than its three-month average volume of 71,781,425 shares.
Sirius XM announced that it plans to announce first quarter 2014 financial and operating results on Thurs., Apr. 24, 2014.
The New York-based satellite radio company’s share value has been trending downward along with the recent tech malaise.
On Apr. 7, SIRI’s share price closed at $3.12, down 8 cents from its closing price of $3.20 the previous day on volume of 66.9 million shares.
Still, the satellite-radio provider Sirius XM Holdings Inc. (NASDAQ: SIRI) has come a long, long way from the time its share price crashed at 5 cents in February of 2009.
Sirius’ strong recovery from its low point was evident in its fourth-quarter and full-year 2013 earnings reported on Feb. 4, 2014.
The company generated record revenue of $1.0 billion and $3.8 billion in the fourth quarter and full-year, respectively, each up 12%. Net income for the fourth quarter and full-year were $65 million and $377 million, respectively, or $0.01 and $0.06 per diluted common share, respectively.
Income from operations was $245 million and $1.0 billion in the fourth quarter and full-year 2013, respectively. Adjusted EBITDA increased 41% in the fourth quarter to a record $326 million. Full-year 2013 adjusted EBITDA was $1.17 billion, an increase of 27% from $920 million in 2012.
Potential Lawsuits Not Hurting SIRI
Despite a myriad of law-firm of Sirius XM for potential stockholder claims as a result of the satellite-radio investigations company’s proposed acquisition by Liberty Media Corp., its stock price is holding its own.
On Jan. 3, 2014, Liberty Media make an offer to buy Sirius for about $10.4 billion at a rate of $3.68 per share. The deal involves creating a new class of stock called Series C, adding 0.076 per share to give the company a total market value of as much as $27 billion.
Although the pending acquisition has triggered a slew of potential stockholder lawsuits, without Liberty Media, Sirius XM might not have been here today.
That’s because in 2009, Liberty Media kept Sirius XM from going bankrupt with a $530 million loan. As a result, Sirius XM has been able to build a subscriber base 25.6 million strong. It’s done so with a line-up of paid-radio choices including classical, rock, alternative, country, sports and live concerts, including the extremely-popular morning man Howard Stern serving as the company’s anchor. Moreover, having new cars equipped with XM receivers has also boosted the company’s popularity and acceptability. However, Sirius XM still faces brutal competition from such digital radio competitors as Pandora Media Inc., AOLRadio and Apple Inc.
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