|New Threads Only:|
|New Threads & Replies:|
Forum List » Value Ideas and Strategies|
Share and discuss value investing ideas and investing strategies.
Facebook: The Social Network Everyone's Talking About!
Posted by: Muhammad Bazil (IP Logged)
Date: March 29, 2013 11:59AM
Facebook Inc. (FB) is the company behind the global social network, Facebook. However, although Facebook has over a billion users, this doesn't mean that they're without competitors, two of those being LinkedIn Corp. (LNKD) and Microsoft Corp. (MSFT) – Microsoft Corporation being the owner of the product Windows Live Messenger (MSN).
The main source of income for Facebook Inc. is through presenting other companies’ adverts within its platform. However, as it takes this platform onto mobile devices, it's important to continue this advert affiliation. A solution has been reached: Facebook Inc. will be adding more adverts within users’ news feeds. They will slowly increase the amount of adverts presented in this way, but at this stage it is more of a test to see what users’ responses are to this innovation.
Facebook has also announced an additional feature for their messenger app which allows users to "voice call" their friends for free. This is pretty much allowing users to ring their friends as if it's a free phone call. It’s free because it means people will spend more time on Facebook, meaning they see more adverts which will then increase Facebook's revenue. However, people are already able to voice chat or even chat face to face using their webcams through Windows Live Messenger, so whilst Facebook's new feature may increase revenue through mobile devices, the new feature’s usefulness may be limited.
While LinkedIn Corp. provides a social platform similar to Facebook, it also provides a platform to allow people to search and apply for jobs over the Internet. This allows employers to see what kind of people are applying for their job advertisements through the social side of LinkedIn and they can make a better judgment that way. LinkedIn has recently announced a revamp of its search engines on the employment side of LinkedIn to allow people to see everything related to the search they've made.
Facebook made a 73.19% gross profit in 2012 and a 1% net profit after all expenses, or 9.7% when excluding provision for income tax which will be paid at some point during 2013. They have $1.575 billion worth of assets of which $1.235 billion is owned, the rest is bought under "capital leases." Information about the company's liabilities is currently unavailable as it hasn't released its full-year accounts; the above information is from its fourth quarter 2012 report (which included full-year results for 2012).
Microsoft Corporation made a 76.2% gross profit in 2012 and a 23% net profit. For every $1 of assets it owns, it has $0.72 of liabilities. It needs to be highlighted that these financials cover the whole of Microsoft instead of just the Windows Live Messenger product.
LinkedIn made an 87% gross profit in 2012 and a 2.2% net profit. It is important to highlight at this point that the net profit has been affected by depreciation.
As a stock, Facebook is quite safe. With over a billion users and a very good gross profit margin, this seems like a good stock. However, in net profit, even if we use the figure before the provision for income tax, it is a decent margin but it's not on the same level as its gross profit margin – it should in theory be making a much higher net profit margin. On the other hand, this could be down to the restructuring of the platform of Facebook to allow it to be used on mobile devices and incorporating adverts within that platform. The security of the company (as a stock) in terms of liabilities to assets ratio is currently unknown, so this will have to wait until its first annual report is released. A key aspect here is that Facebook is currently a globally recognized brand, so as a stock it won't offer the potential for huge levels of growth, it will inevitably be a stock that offers security (and slow growth) with income. So if you're looking for a secure stock providing slow growth and an income, this is a BUY. However, if you're looking for huge growth, this would be a SELL on the basis that there are certainly more social platforms that aren't recognized at the moment but could be "the next big thing."
Stocks Discussed: FB, MSFT, LNKD,
Disclaimers: GuruFocus.com is not operated by a broker, a dealer, or a registered investment adviser. Under no circumstances does any information posted on GuruFocus.com represent a recommendation to buy or sell a security. The information on this site, and in its related newsletters, is not intended to be, nor does it constitute, investment advice or recommendations. The gurus may buy and sell securities before and after any particular article and report and information herein is published, with respect to the securities discussed in any article and report posted herein. In no event shall GuruFocus.com be liable to any member, guest or third party for any damages of any kind arising out of the use of any content or other material published or available on GuruFocus.com, or relating to the use of, or inability to use, GuruFocus.com or any content, including, without limitation, any investment losses, lost profits, lost opportunity, special, incidental, indirect, consequential or punitive damages. Past performance is a poor indicator of future performance. The information on this site, and in its related newsletters, is not intended to be, nor does it constitute, investment advice or recommendations. The information on this site is in no way guaranteed for completeness, accuracy or in any other way. The gurus listed in this website are not affiliated with GuruFocus.com, LLC. Stock quotes provided by InterActive Data. Fundamental company data provided by Morningstar, updated daily.