Facebook Inc introduced gift cards on Thursday that consumers can use at Target Corp and a handful of other businesses in the social network’s latest move into the retail market.
Consumers in the United States can buy the cards for their Facebook friends and choose from four different businesses: Target, LVMH Moet Hennessy Louis Vitton SA’s Sephora, Jamba Inc’s Jamba Juice and Darden Restaurants Inc’s Olive Garden.
A card can hold multiple gift balances, each dedicated to a specific retailer, Facebook said.
The world’s No. 1 social network, with more than one billion users, Facebook is gradually offering more retail services, though it relies on advertising for the bulk of its revenue.
Last year, it launched a feature that allows users to send retail goods, such as sunglasses and pastries, to their friends on the social network.
Facebook Finance Chief David Ebersman tempered expectations about the new gifts business in its quarterly earnings conference call with analysts on Wednesday.
While Facebook believes online commerce has “long-term potential,” the current revenue from such efforts is very small and will remain so throughout the year, said Ebersman.
Shares of Facebook fell 13 cents at $31.10 in mid-day trading.
Facebook stock avoids steep drop as Street rethinks results
Shares of Facebook Inc recovered from an 8 per cent slide on Thursday, finishing the regular session down less than 1 per cent, as Wall Street’s initial alarm over mobile revenue results and spending plans subsided.
Facebook said on Wednesday that fourth-quarter mobile advertising revenue doubled from the third quarter, but the results failed to live up to some investors’ high expectations. Chief Executive Mark Zuckerberg’s comments about boosting spending in the coming year signaled that profit margins will be under pressure, adding to concerns.
“The initial fast money said earnings are going down, numbers are coming down, the stock is going to get hit,” said Macquarie Research analyst Ben Schachter.
“But 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.
Facebook has long established itself as one of the most popular websites with more than a billion users, but investors have worried that until the company’s mobile advertising strategy takes off, revenue growth will remain shaky.
Three brokerages downgraded the stock, but most analysts said investor expectations were too high and Facebook’s mobile advertising business was a good long-term bet.
Pivotal Research Group analyst Brian Wieser upgraded Facebook to a “buy” rating on Thursday, calling Wall Street’s reaction to the results “downright dazed.”
The stock market incorrectly interpreted Facebook’s “mobile revenue figures as a negative when in fact they are part of a story that we can see as qualitatively more favorable,” Wieser said.
Shares of the company finished regular trading on Thursday down 0.8 per cent at $30.98 on the Nasdaq. Earlier in the session, the stock fell as low as $28.74. Facebook stock has lost more than a quarter of its value since its botched debut in May.
The company reported a better-than-expected fourth-quarter profit on Wednesday and said mobile advertising revenue doubled to $306 million, suggesting it was making inroads into handheld devices such as smartphones and tablets.
Investors were looking for at least $350 million in mobile advertising revenue, Piper Jaffray analyst Gene Munster said in a note to clients.
“While the trajectory of mobile growth may not be as steep as some investors were hoping, the theme of mobile as the future of Facebook remains intact,” Munster said.
BMO Capital Markets analyst Daniel Salmon, however, said Facebook’s 2013 stock performance would not be dictated by its ability to generate mobile ad dollars. He downgraded the stock on Thursday to “market perform” from “outperform.”
Salmon said new catalysts were necessary to drive Facebook’s stock price up.