Facebook (FB) reported earnings on Wednesday that blew away Wall Street expectations. In an increasingly mobile world, Mark Zuckerberg’s dorm room creation is looking more and more like one of the best advertising platforms around.
Overall revenue increased 72% to $2.5 billion in the first quarter, above the $2.36 billion analysts had expected. Ad revenue was up 82% from last year, the fastest growth rate for Facebook in three years, and more than half -- $1.3 billion -- came from mobile users. The company reported it hit 609 million daily active users on mobile in the first quarter, up 43% from a year ago.
There have been concerns that Facebook was losing its cool factor, especially with teens. Whether or not that is true, the company’s Instagram app is still extremely popular in that demographic. It hit 200 million monthly active users, about ten times the number of active users when Facebook bought it for $1 billion two years ago.
It’s still early days for putting ads on Instagram, but Sheryl Sandberg said Facebook is seeing “just tons of demand” from advertisers. But, she warned, Facebook is taking it slow with the photo sharing service and meaningful revenue is probably not arriving until a 2015. Zuckerberg said Instagram and Facebook’s Messenger service, which also has 200 million users, are "probably a few years away from being an important business for us.”
In Facebook’s core business (the division producing all the revenue right now), there are signs that existing users are spending even more time on Facebook than ever. Zuckerberg said 63% of Facebook users come to the site at least once a day, up from 61.5% at the end of the fourth quarter.
On the other hand, investors will have to pay up for a piece of Facebook’s growth. The company trades at 80 times earnings, or close to 50 if you look at projected earnings for the next year.
And it’s extremely popular with analysts – 34 buy ratings, 7 holds and no sells, according to Factset.
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