Friending Facebook To The Growth Portfolio In Replace Of Regeneron
- Regeneron is a biotech company which gave me a great return in a short amount of time and I just wanted to lock up some profits in the name.
- Facebook's growth potential consists of being able to connect people and making ad revenues through every facet of the billions of connections they make between people in a single day.
- Facebook was caught in the maelstrom of profit taking last week ahead of the Alibaba IPO coming this week.
Update: Facebook May Soon Enter The Internet Service Provider Industry
- A Google satellite expert has moved to Facebook.
- This executive addition has cemented my view that Facebook could launch as an internet service provider in developing countries.
- In my previous article, I discussed how the acquisitions of WhatsApp, Ascenta, and Pryte points to FB possibly entering the ISP industry.
- Facebook has a future free cash flow stream just like any other company. The stream can be discounted and a fair value can be estimated.
- The challenge with Facebook is that the company's future free cash flow stream has a wide range of outcomes both to the upside and to the downside.
- This is why Benjamin Graham's margin of safety is critical in evaluating entry and exit points in Facebook. We can't ignore the future because it is difficult to predict.
- Though we weren't fans of its IPO, we revised our view and placed an $80 fair value when shares were in the mid-$40s. Its price has converged to those levels.
- In this piece, let's calculate Facebook's updated fair value estimate and arrive at what we consider to be fair margin of safety.
- Facebook’s aggressive recruitment of top content publishers on YouTube is a good reason for investors to hold on to their shares.
- Next only to YouTube, Facebook is already the No. 2 online video platform.
- Successful recruitment of the top YouTube content providers can accelerate Facebook’s journey towards the $94 price target of UBS analysts.
- Innovative high growth valuation technique used to discern upside potential and downside risk.
- The social media space has the highest innovation value in the market overall.
- Facebook is the bellwether of the social media industry.
- Google finished the second quarter with $14.3 billion in ad revenue compared to Facebook’s $2.68 billion. Ad revenue accounts for more than 90% of both companies’ overall revenue.
- Facebook’s mobile ad revenue accounts for more than 60% of its overall ad revenue, while Google mobile ad revenue accounts for only 12% of the company’s overall revenue.
- In the second quarter, Google’s aggregate paid clicks grew 25%, more than offsetting the 6% decline in CPC.
Should Investors Continue Holding Facebook At Its 52-Week High?
- Facebook is seeing a spike in user engagement, and it is undertaking initiatives to bring more people online to increase its addressable market.
- Facebook is gaining strong traction in advertising at the expense of Google.
- Facebook is making product improvements to attract more advertisers.
- Facebook's valuation and projected growth rate indicate that the stock can go higher.
- Instagram released Hyperlapse, a unique feature that helps with creating time lapses. This new feature will appeal to the younger demographic.
- Instagram and Facebook remain dominant mobile apps, however Google also owns a compelling portfolio of mobile apps as well.
- Going forward both companies (Facebook and Google) look well positioned, and will grow alongside each other.
- Twitter and Facebook remain compelling growth investments.
- Other properties like MSN Messenger have declined into irrelevance, which was driven by negligence.
- Twitter and Facebook constantly experiment, add new members to a strong team, and are always open to new ideas.
- By constantly innovating/tweaking, launching new services, they continue to survive in a constantly changing environment, and for investors that's a real durable advantage.
- Facebook's 61% y/y revenue growth does not include revenue from its ancillary applications.
- Even with a market capitalization hovering around $200 billion FB's growth opportunities warrant higher upside.
- The market has not priced in the revenue generating capabilities of Instagram or its messenger applications.
Booking Profits In Facebook And Putting Them To Work In Toll Brothers
- With interest rates remaining low, I believe the affordability of a new home is becoming much better, hence I'm picking Toll Brothers as one of my housing stocks.
- Facebook is expensive on earnings growth expectations.
- Toll Brothers is inexpensive on earnings growth expectations.
Facebook's Internet Philanthropy Also Is Strategic Genius
- Facebook is engaged in a complex effort to bring the internet to the two-thirds of the world currently living in the dark.
- It's efforts, through Internet.org and with regard to its plans involving satellites, drones and lasers, should help improve communities, the global society, economies and lives.
- The effort may be seen by some as face time and by others as true good works, but I see it as pure strategic genius providing gains for shareholders.
Facebook Drives Value For Their Real Customer
- Facebook’s customers are the people that give them money, not the users of the site.
- Facebook is working to deliver a better product to marketers. Tracking customers proves their model.
- Users are often quoted in the aggregate, but the real value comes from those that buy from advertisers.
Yesterday, 4:48 PM
- Though plenty of ink has been spilled over Facebook's (NASDAQ:FB) competitive threats over the last year, eMarketer estimates the average U.S. Facebook user now spends 39 minutes/day on its site and apps - up from 38 in 2013 and 35 in 2012. The figures exclude Instagram, whose user base has a large U.S. component, and also WhatsApp.
- In spite of the usage growth, Facebook's share of U.S. social media time has fallen to 33.3% from a 2011 peak of 40%. Likewise, its share of U.S. digital time spent has slipped to 6% from 6.5%. On the other hand, with digital continuing to grab media share, Facebook's share of total media time spent has grown to 2.8% from 2.2%.
- Meanwhile, with Facebook's ad sales having soared over the last two years thanks to an all-out monetization push (especially on mobile), eMarketer estimates the company now has a 9.7% share of U.S. digital ad spend, 370 bps above its digital time share. By contrast, all other social networks claim just a 3.9% share of U.S. digital ad spend, in spite of having an 11.9% share of time spent.
- Likewise, Pandora (NYSE:P) is estimated to have only a 1.4% digital ad spend share vs. a 7.1% share of time spent. With the company spending aggressively to grow its ad salesforce, that gap could narrow in the coming years.
- As is the case for many of its peers, the U.S. remains crucial to Facebook's top and bottom lines: North America still accounted for 44% of Q2 revenue, even though it was responsible for only 15% of MAUs.
- Previous: Pew's U.S. Facebook survey data
Fri, Sep. 12, 10:53 AM
- Facebook (FB -0.3%) reportedly has reached out to some of YouTube's (GOOG -0.7%) top content producers and encouraged them to test distributing their videos on the social network, in another signal that it wants to muscle in on the video site.
- Content creators now use Facebook to promote their programming but prefer people to watch the videos on YouTube and other platforms where they can make money through ad sales more easily.
- FB and the video content creators are discussing how advertising might be incorporated into these videos, and some sort of ad product likely will be rolled out by the end of the year, WSJ reports.
Thu, Sep. 11, 7:08 PM
- After moving back above the $100/share level, Apple (NASDAQ:AAPL) is back over the $600B mark in market cap, pushing it nearly $200B above Exxon Mobil (NYSE:XOM), the next largest company in the U.S.
- XOM is still valued at more than $400B, but Google (NASDAQ:GOOG) at $397B and Microsoft (NASDAQ:MSFT) - which has surged in 2014, adding $74B in market cap to $386B - are closing the gap.
- Berkshire Hathaway (NYSE:BRK.B) completes the top five with a $339B market cap; no other companies are worth more than $300B.
- Rounding out the top 20 market caps: JNJ, WFC, GE, WMT, CVX, PG, JPM, FB, VZ, IBM, PFE, KO, ORCL, T, MRK.
Wed, Sep. 3, 11:52 AM
- The Gear VR, long rumored to be in the pipeline, relies on Samsung's (OTC:SSNLF, OTC:SSNGY) just-announced Galaxy Note 4 to run Oculus VR's (FB -1.1%) software, and provide the device's display and sensors. For now, no other phones work with the device.
- Unlike the gaming-focused Oculus Rift (still in beta), the Gear VR doesn't need a wired connection to a PC. Users interact with the headset through a trackpad and head movements. No price details have been given yet.
- Initial testers are intrigued by the Gear VR's potential, but are also quick to point out content/game support and software/UI development are still very much works in progress. Samsung/Oculus promise a content store will soon be available, and note initial content partners include DreamWorks, Warner Bros., Fox, and Marvel.
- Facebook was recently reported to be working with Hollywood on Oculus deals. Meanwhile, Oculus CEO Brendan Iribe has made it clear he considers OEM deals crucial to his firm's efforts to drive mass adoption of its platform, which has a solid head-start on rivals from a software standpoint. Competition will be provided by Sony's Morpheus headset and Google's Cardboard Android VR platform.
Tue, Sep. 2, 1:53 AM
- EU regulators are now soliciting feedback from Facebook's rivals and telecoms operators, after setting an Oct. 3 deadline to decide whether to clear Facebook's (NASDAQ:FB) $19B offer for WhatsApp.
- In a questionnaire sent to third parties, the EU competition watchdog asked if the deal would have a negative, neutral or positive impact on users of mobile messaging and social networks.
- U.S. regulators already gave the deal a green light in April.
Mon, Sep. 1, 6:30 AM
- EU antitrust authorities will decide whether to clear Facebook's (NASDAQ:FB) $19B offer for WhatsApp by Oct. 3.
- U.S. regulators have already cleared the takeover in April, provided WhatsApp sticks to its current privacy practices after the merger, including not to use users' personal data for targeted ads.
Wed, Aug. 27, 9:23 AM
- Citing valuation and expectations of slower 2015 growth, Janney's Tony Wible has downgraded Facebook (NASDAQ:FB) to Neutral. His target remains at $82.50.
- Wible launched coverage on Facebook at Buy a year ago, when shares were at $37.81. Like others, he remains upbeat about new monetization opportunities (Instagram, video ads, etc.).
- Facebook goes for 37x 2015E EPS. Estimates have steadily risen thanks to a string of earnings beats.The 2014 revenue growth consensus is at 55.6%, and the 2015 consensus at 34.4%.
- Shares -0.9% premarket.
Mon, Aug. 25, 11:23 AM
- WhatsApp (FB +0.6%) now has over 600M monthly active users (MAUs), CEO Jan Koum declares. The mobile messaging leader had only topped 500M in April, and had 450M at the time the Facebook deal was announced in mid-February.
- Mark Zuckerberg has long been confident WhatsApp will eventually have over 1B users, and has even reportedly suggested WhatsApp could eventually have a bigger base than Facebook proper. Facebook claimed 1.32B MAUs at the end of Q2.
- Meanwhile, comScore estimates Facebook's core app had 115.4M U.S. unique visitors in June, 32M more than the second-most-popular U.S. app (YouTube) and good for a 72% penetration rate. Globally, Facebook had 1.07B mobile MAUs at the end of June.
- comScore estimates Instagram had 46.6M U.S. users (#8 overall), and Facebook Messenger 39.2M (#12). WhatsApp, often used as an SMS replacement abroad, didn't crack the top-25, as U.S. users continue relying heavily on the SMS services often bundled with their mobile plans.
- Not surprisingly, comScore's data also suggests core Facebook's U.S. base skews older, and Instagram's base skews younger. Whereas core Facebook accounts for 18.4% of the time spent on apps by U.S. users aged 35-54, it accounts for 14.8% among those aged 18-24. Whereas Instagram accounts for just 1.2% of the time spent by the former group, and 6.6% of the time spent by the latter.
Thu, Aug. 21, 2:36 PM
- Five months after striking its first major ad agency deal, Instagram (FB -0.2%) is offering advertisers the kind of analytics and campaign-management tools they're accustomed to having for campaigns on Facebook proper (or for that matter, Google or Twitter).
- A performance-tracking dashboard includes tabs for creating/previewing ads, tracking ad impressions/reach, and monitoring user engagement. Facebook has been taking a go-it-slow approach to monetizing Instagram's 200M+ users, even as many top brands gain huge followings on the photo/video-sharing platform.
- Separately, Facebook has launched analytics tools for its App Links platform, which allows links within apps (including ones found in Facebook ads) to open other apps. The tools, provided by Facebook's Parse app tool unit, allow developers to track clicks and return visits, among other things.
- Facebook mentioned in July App Links, adopted by the likes of Spotify, Hulu, and Vimeo, has enabled 1B+ links. Product manager Vijay Shankar notes their ability to improve mobile ad quality, which in turn can improve click rates/pricing. "Ads on mobile [have] a lot of catching up to do, and I think this can help with that."
Thu, Aug. 21, 11:43 AM
- Hedge funds are having a difficult time of it again this year, up 1% vs. a 7.5% gain for the S&P 500, according to Goldman Sachs, which crunched the numbers on 775 funds with $1.9T in AUM.
- Nevertheless, Goldman's list of 50 stocks which "matter most" to hedge funds has outperformed the S&P 500 on a quarterly basis 66% of the time since 2001. The stocks this quarter (posted in order of the number of funds in which a name is a top-10 holding):
- ACT, AAPL, FB, AGN, AAL, GM, TWC, AIG, MSFT, HTZ, CHTR, MU, WMB, LNG, C, DAL, HCA, APC, CBS, ALLY, GOOGL, APD, NRF, BAC, EBAY, LBTYK, PCLN, VRX, BIDU, DTV, DISH, DG, EQIX, MA, WAG, ARCP, GILD, LINTA, MON, FOXA, VC, AMZN, BRK.A, BRK.B, SUNE, CMCSA, JPM, MIC, CCI, HES, LAMR.
- A special call-out to Northstar Realty (NYSE:NRF), Visteon (NYSE:VC), SunEdison (NYSE:SUNE), Macquarie Infrastructure (NYSE:MIC), and Lamar Advertising (NASDAQ:LAMR) for making the list of hedge fund hotels despite their relatively tiny market caps.
Sun, Aug. 10, 4:34 PM
- The latest iOS version of Facebook Messenger, released after Facebook (NASDAQ:FB) began requiring users to download a standalone Messenger app to send IMs to Facebook friends, has a rating of just 1/5 stars on the App Store. Over its entire lifetime, the app still has a rating of 4/5 stars.
- Both Twitter and the reviews sections for the App Store/Google Play have been flooded with complaints about Facebook's requirement. "I absolutely refuse to download another app just so I can chat on Facebook with my phone," writes one irate reviewer, echoing a common sentiment. Also: revised privacy terms have sparked some criticism.
- Mark Zuckerberg has argued using a standalone Messenger app yields a better experience than using Messenger via the core Facebook app. Requiring a separate messaging app is part of a broader Facebook effort to provide a slew of apps optimized for specific services, and in doing so avoid being just one icon on an iOS/Android home screen.
- Zuck has also suggested Facebook plans to add payments support to Messenger, which now has 200M+ MAUs and is run by ex-PayPal chief David Marcus. Facebook was recently reported to be thinking of adding support for Uber's car-hailing service to Messenger.
- Meanwhile, Facebook's new Slingshot app, a would-be Snapchat rival that requires recipients of an ephemeral photo/video to reply with one of their own, has plummeted on App Store download charts. A few other recent Facebook products have met similar fates.
Fri, Aug. 8, 2:22 PM
- The Information reports Facebook (FB - unchanged) is talking with execs at major film studios - the list includes Disney, Fox, Warner Bros., and Paramount, as well as individual directors - about creating content for the Oculus Rift.
- Discussed ideas are said to include "Oculus experiences" that would act as film companions, and even (further down the line) full-length movies optimized for Oculus' VR headsets.
- Mark Zuckerberg has repeatedly predicted Oculus will support a wide variety of entertainment, productivity, and social sharing/interaction use cases in addition to gaming.
- With the Rift still in beta, major studios might wait for a full launch and larger sales volumes before making a big commitment to the platform. Oculus CEO Brendan Iribe has said his company is looking for hardware partners to drive volume growth. It has already been reported to be working with Samsung.
Tue, Jul. 29, 4:37 PM
- Facebook (NASDAQ:FB) +0.9% AH, LinkedIn (NYSE:LNKD) +2.1% AH, YELP +2.7%, and Twitter shareholder GSV Capital (NASDAQ:GSVC) +4.8% after Twitter skyrockets AH thanks to a big Q2 beat (moreso on revenue than EPS), strong Q3 guidance, and better-than-expected MAU growth.
- Yelp is due tomorrow, LinkedIn on Thursday, and GSV on Aug. 7. Facebook posted strong Q2 numbers of its own last week.
Thu, Jul. 24, 10:37 AM
- "We think 2Q represents further validation that Facebook (FB +5.5%) can continue to drive mobile ad revenue growth through better ad targeting, relevancy and quality, and through continued growth in advertiser demand in its ad auction," writes JPMorgan, bullish as ever following Facebook's Q2 beat.
- Needham estimates Facebook now "accounts for $1 of every $5 ad dollars spent on mobile devices." SunTrust observes the Q2 growth came in spite of little or no revenue from a slew of long-term initiatives, including video ads, Instagram, Buy button ads, WhatsApp/Oculus, and the mobile ad network.
- Jefferies makes a similar point. It adds Facebook's "ever-deepening ties" to e-commerce leave it well-positioned to "capitalize on strong holiday shopping trends." Others are encouraged by Mark Zuckerberg's CC remarks (transcript) about future payments integration for Messenger, and his claim that the average U.S. user spends 40 minutes/day on Facebook.
- Shares are making new highs, and now trade at a steep 12x 2015E sales. Revenue estimates should rise some in response to the Q2 numbers.
- Prior Facebook earnings coverage
Thu, Jul. 24, 9:18 AM
Wed, Jul. 23, 6:30 PM
- Facebook (NASDAQ:FB) will make efforts to accept more payments on its platform, says Mark Zuckerberg on the Q2 CC following a question about Facebook's Buy button and related payments tools (still in testing). However, he adds advertising (92% of Q2 revenue) will remain the company's main business.
- Zuck also reiterates (in spite of Facebook's efforts to grow public sharing) creating private spaces for users remains a core objective. He states Messenger (now run by ex-PayPal chief David Marcus) will play a pivotal role in furthering this goal. WhatsApp presumably will also play a role.
- New CFO David Wehner states Facebook's ad prices effectively more than doubled Y/Y due to a shift towards more costly news feed/mobile ads (improved targeting also didn't hurt). This enabled ad sales to rise 67% in spite of a 25% drop in ad impressions.
- Sheryl Sandberg notes the acquisition of video ad tech platform LiveRail will further Facebook's ad network ambitions; the company just recently launched its mobile ad network. She also declares marketers are getting more creative with Facebook campaigns, comparing them to TV campaigns in the process.
- Facebook now has 399M mobile-only MAUs (30% of all MAUs). North America made up 44% of Q2 revenue, down from 47% in Q1. North American ARPU ($6.44) still dwarfs Facebook's global ARPU ($2.24).
- Live blogs: I, II, III.
- Prior Facebook earnings coverage
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