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Facebook: Poised for Growth
Posted by: CMI Research (IP Logged)
Date: August 19, 2013 05:29PM
With over 1.15 billion monthly active users, Facebook Inc. (FB) is changing the way hundreds of millions of people relate to one another and share information. The rapidly growing company has revamped its business model to post higher revenue from mobile ads and has delivered a healthy second-quarter profit that reversed a loss from a year earlier. The results came when Google Inc. (GOOG) declared weaker-than-expected results, signaling that Facebook's aggressive push into the mobile advertising market has continued to pay off.
Clearly shown in the figure, advertising revenue has outperformed figures from the past.
Second Quarter 2013 Financial Highlights:
Facebook Inc. reported its financial results for the second quarter, which ended June 30, 2013.
Competition and Threats:
On Friday, Aug. 16, 2013, Topeka raised Facebook's price target to $47 from $40. Also in early August 2013, Munster increased their price target to $46 from $38 after evaluating that, if Facebook obtains 5% of its ad revenue from online video ads, Facebook's online video ad revenue will surpass analysts' 2014 estimate of $330 million.
Morgan Stanley in their early August 2013 report argues Facebook's expected launch of video ad units will boost total revenue and earnings by 10% to 15% within one to two years.
[size=13px; ]Revenue estimates from analysts, as collected by Yahoo Finance, have estimated growth of 3.15% for the third quarter, and whopping 15% growth in the fourth quarter.[/size]
With a P/E ratio as high as 54.75, Facebook Inc. looks expensive when compared to industry P/E ratio of 8.62. But decisive strategies and estimates for future seem promising to long-term investors.
Specifically, Facebook's initiatives to step into the lucrative market of online video ads looks promising. In addition, ad agencies have started to shift from email marketing to platforms such as Facebook as a digital advertising vertical. Facebook might be expensive now and while it's certainly not without its risk, I believe that this is the start of a long positive run.
Stocks Discussed: FB, GOOG, AAPL,
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