Facebook IPO: a bittersweet one-year anniversary

One year after the disastrous Facebook IPO, the company is making strides in mobile ad revenue, but its stock price is still far below its original IPO price. Also this week: Consumer sentiment hits six-year high; retail sales rise unexpectedly; and the world has a new (old) richest person. 

Facebook IPO one year later: The initial public offering that was supposed to signal a new era for social media turned instead into one of the most botched IPOs in US history. The stock fell by more than half its opening price in a matter of months. Investors weren't convinced Facebook could translate all its online activity into a big revenue stream.

In the past year, the social media giant has staged a comeback. Chief executive Mark Zuckerberg has made a big effort in improving Facebook's mobile experience and generating ad revenue from it. The company reported that in less than a year, about 30 percent of its total ad revenue – some $375 million in the first three months of 2013 – came from mobile ads. The mobile ad industry is expected to skyrocket in the next several years, so Facebook can expect strong growth, analysts say.

But investors don't seem convinced. On Friday, Facebook stock closed at $26.25, still 31 percent below the $38 per share price it opened at one year ago.

Consumer sentiment soars: The University of Michigan’s index of consumer sentiment rose to 83.7 in its initial May reading. If it holds, that would be the highest level for the index since 2007, before the Great Recession took hold. Both consumers’ economic expectations and current conditions improved, outpacing analysts’ expectations.

The upbeat reading comes as a surprise because the economy is expected to slow this quarter as federal spending cuts begin to reduce working hours of government employees as well as orders for government contractors. But any slowdown doesn't seem to have dented consumer sentiment – or spending, for that matter.

"A big reason for this improvement was that 37 percent of households thought they were better off financially than a year ago (previous: 33 percent), the highest reading since 2007,” Cooper Howes at Barclays Research wrote in his analysis. “In our view, the continued recoveries in housing and labor markets, as well as the improvements in income and wealth that accompany them, should put consumer sentiment on an upward trend. That being said, the index has been volatile in recent months between preliminary and final prints as fiscal tightening has continued to take effect.”

Retail sales keep climbing:  Despite expectations to the contrary, retail sales ticked up slightly in April, increasing 0.1 percent from March. Sales fell 0.5 percent in March, and analysts expected a similar decline last month.  The results were particularly encouraging because the uptick happened in spite of falling gas prices, which had buoyed gains in previous months. “It remains to be seen how much of the April increase will break down into real activity as opposed to shifts in prices, but it certainly suggests that, despite some softening, households have persisted with a solid pace of spending despite the tax increases faced at the start of the year,” Barclays Research economist Peter Newland wrote in an e-mailed analysis.

“This is a good report,” Chris Christopher, director of consumer economics at IHS Global Insight, wrote in his analysis.  “The first quarter was rough for many American households with the expiry of the payroll tax cut in January, rising pump prices in February, and elevated discussion of sequester issues in early March. Consumers are taking advantage of falling pump prices, a relatively better employment market, modest consumer goods price increases, a strong stock market, and a housing market that seems to be gaining traction.”

For more on retail sales, read Monitor reporter Mark Trumbull’s take. 

Jobless claims rise: The number of people filing for federal unemployment benefits increased by 32,000 to 360,000 last week, reversing three consecutive weeks of declines. “The Labor Department report did not point to any specific factors explaining the increase in initial claims, although highlighted the non-trivial role of seasonal factors,” Mr. Newland at Barclay’s wrote.

Bill Gates back on top: Microsoft founder Bill Gates reclaimed the title of the world’s richest person with a net worth of $72.7 billion, according to the Bloomberg Billionaires Index, updated daily. He reclaimed the top spot from Mexico’s Carlos Slim, who had held it for the past five years. Why the rankings shakeup? Microsoft’s shares are up about 28 percent this year, while Mr. Slim’s net worth dropped around $3 billion on account of regulatory issues with his mobile phone operation company, America Movil SAB, according to Bloomberg.