Facebook Ahead of Earnings!
Adrian is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
For some investors it may seem like a scary thing to get into Facebook’s (NASDAQ: FB) stock right now, and who can blame them right? I mean, the stock has appreciated some 52% from $19.50 on Oct 23, 2012 a day before the 3Q12 earnings release to almost $30 as of Jan 18, 2013, while others are still very optimistic about the future for this young company. I have written on two other occasions about the prospects for this company and the future of the stock ahead (those of you who want to read the full reports please visit my personal blog and just look for the articles on the right side), and it looks to me as a still great opportunity to jump in, here’s a recap:
Revenue - It has been consistently increasing over the last 9 quarters at a compounded rate of about 13% sequentially, but decreased over the last 4 quarters to a rate of 3.5%
Costs and Expenses – The Company should start delivering improvements in this area, during 2012 they recognized a huge portion of their RSU’s (Restricted Stock Units) causing a big impact on the bottom line and more specific during the 3Q12 and it is now expected to get back to normal levels.
Monthly Active Users (MAU’s) – A very important metric for Facebook, it has consistently increased to a nice 1,007 million, as reported on the last earnings call. This number, in my opinion, will be maintained if not improved during this quarter with no signs of deterioration. Google+, the social site of Google (NASDAQ: GOOG) has been improving over the last few months, in terms of users, but not as much to represent a dent in Facebook’s user base at least yet. However, I think that it is important to keep a close eye to Google+ service in the near future, almost overnight shifts can happen as it did when may users migrated from MySpace to Facebook a few years ago.
Average Revenue Per User (ARPU) – Another important metric, and one I expect to be improved this quarter (4Q12) given the fact that mobile monetization was in full display and many products targeting mobile users were rolled out over the last few months. I have said before that at least $1.40 but now I think it can hit $1.50.
Cash on Hand – Having more cash available than their entire debt is certainly a good factor for Facebook’s management team, giving them room to work on what matters for them and investors and not spending time on managing debt.
Products – There are now several money making products where the Company relies on to bring in revenue. Though we may know the name of the products, the truth is that we don’t know if they will ever breakdown the amount of revenue each generates. However, it is important to stay up to date with most of them to get a sense of what’s going on.
Gifts, for example, is one of the products I believe will take off eventually. Although right now I haven’t seen many people using this feature, it may be just a matter of time for this to catch up. I have used it and I am very satisfied with it.
In the most recent press release, Zuckerberg talked about a new product, “graph search” a way to know better your friends and surroundings. This new product and the “nearby” feature are competing with Yelp (NYSE: YELP), not only you can see what others think or say about certain business but get more trustworthy reviews when coming from people you actually know.
With all the information Facebook possesses from its users and the constant interaction users have with each other on the site, this social platform is getting content richer and stronger every day. I won’t be surprised if one day Facebook becomes the ultimate marketing company, after all, marketing companies where using “bulk” information on customer groups, now it is becoming more and more specific getting to a point where an add may be tailored just to one person.
Facebook should be releasing their latest earnings reports on Jan. 31, 2013 and with it I expect the stock climb and continue its upward trend, at least in the near future.
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