Facebook Leaves No Doubt … It’s Awesome (FB)

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How great were fourth-quarter numbers of social media giant Facebook (FB)?

Facebook Leaves No Doubt ... It's Awesome (FB)Here’s a hint … Chegg Inc (CHGG) CEO Dan Rosensweig couldn’t have been any more right when we said “If you’re going to market online, your first buy is on Facebook.” Facebook’s posted numbers suggesting it was indeed the first, biggest, and best online destination to tap as a marketing tool.

And yet, the company is still nowhere its peak potential, as it’s still in the midst of figuring out how to get the most out of mobile and has only recently begun to monetize (in a meaningful way) its Instagram platform as an advertising venue.

Facebook Q4 Earnings Results

Last quarter, Facebook earned 79 cents per share on revenue of $5.84 billion. Both figures handily beat expectations for a profit of 68 cents per share of FB and sales of $5.37 billion. And, both figures were well beyond the year-ago tallies of 54 cents per share and a top line of $3.85 billion. That’s bottom-line growth of 46% and sales growth of 52%, for those keeping score.

The real star of the show was mobile, in that mobile advertising made up 80% of the company’s revenue versus only 69% in the same quarter a year earlier. The total number of daily mobile users improved 25% on a year-over-year basis, to 934 million. That figure was up 4% from Q3’s figure.

That’s the curious aspect of the Facebook numbers: The bigger it gets, the better it gets.

It’s not one of the primary metrics most investors care about immediately following an earnings report, but per-user revenue growth is starting to accelerate for Facebook again after sliding lower in 2014 and then finally stabilizing in 2015. Last quarter the social networking site extracted an average of $3.73 per user, up 33% on a year-over-year basis.

That’s largely the result of a new, deliberate focus on selling more lucrative mobile ads and video advertisements. Ad prices were up 21% … despite the fact that the company ramped up its total supply of ad slots.

At the same time, Facebook mustered impressive user growth. A total of 1.59 billion users now log onto the site at least once per month, up 3% from Q3’s monthly active user tally, and up 14% from the Q4 2014 headcount of 1.39 billion users.

The combination of more users and higher ad prices and more ad inventory more than explains the amazing (and slightly exponential) growth the company has once again posted.

Bottom Line for FB

There will inevitably come a time when Facebook can’t put up these kinds of results simply because it will run out of new users to add and ad prices will reach their peak. Ad inventory has a limit too. That point in time is still well into the future, though, so for now, FB remains an impressive growth stock.

A Goldman Sachs analyst noted “We believe Facebook is well positioned to increase its share of digital ad spend as well as to help grow the overall category given its reach and effectiveness for advertisers.”

Pacific Crest analysts underscored Goldman Sachs’ message with a little more detail, saying:

“This is bullish as it speaks to potential higher overall monetization as the core continues garnering more ad dollars and Instagram (we believe) becomes a growing contributor throughout 2016…. [Facebook Messenger, Facebook Audience Network, Oculus and WhatsApp are still] monetization irons in the fire for even larger long-term growth.”

In other words, Facebook still has plenty of room and reason to keep growing at this stunning pace.

As of this writing, James Brumley did not hold a position in any of the aforementioned securities.


Article printed from InvestorPlace Media, https://investorplace.com/2016/01/facebook-fb-awesome/.

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