Facebook has surpassed analyst EPS estimates three of four quarters since it went public. Over that period, the stock has risen the next session two of four quarters. Last year, the stock fell the next session following its earnings report. ...
We're looking for a positive investor reaction to Facebook's results as the company's monetization efforts start to bear fruit.
Outside of earnings, whether you love, hate, or are indifferent about Facebook, the one thing that appears to be becoming more evident is that the company has done a good job on the innovation front and learned to monetize its huge user base over the past year.
Since its IPO, new monetization efforts include newsfeed ads (ads directly integrated into the newsfeed); ad exchange (real-time, bid-based system allowing advertisers to "re-target" users on Facebook using data collected from their online surfing activities outside of Facebook); custom audiences (which allows marketers to "merge" their customer/prospect databases with Facebook's database); offers (gives advertisers the ability to target Facebook users with special offers); app downloads (enables app developers to market their apps to Facebook mobile users in order to drive app discovery and downloads); and partner categories (gives advertisers ability to easily utilize offline data from the likes of Axciom, Epsilion, and Datalogix to target Facebook users).
Advertisers are starting to embrace its platform, and finding that customer acquisition campaigns are both highly effective and comparatively cheap. Graph Search and Instagram Video, meanwhile, are new other areas ripe with potential.
Meanwhile, despite fears that Facebook is losing its cool, according to the recent comScore data, overall user engagement is actually on the rise, and quite substantially on a year-over-year basis. The company does have to make sure its monetization efforts don't drive away users, but so far that doesn't appear to be the case.
From a valuation perspective, the company is trading at an EV/EBITDA multiple of just 12x based on 2014 estimates, which is cheaper than its Internet content peers, despite growing revenue at a faster clip, making the stock attractive at current levels.
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