Facebook Inc. is among the companies most frequently searched on MarketWatch. This Facebook FB Quarterly Review.
The stock will display a comparison of key metrics to watch out for and a summary of the company’s most critical issues to help investors make better decisions.
These updates will also include comparing results to those of competitors. Keep in mind that no two companies are exactly the same – not even competitors are competing in all areas. Any investor needs to do their own research to make informed long-term decisions.
Where Facebook fits
Facebook isn’t in the trillion dollar mega-cap tech club yet, but it’s pretty close. With a market capitalization of about $ 780 billion, it is the fifth largest publicly traded company in the United States, despite only recently going public.
In fact, we will soon celebrate the 10th anniversary of Facebook’s IPO on May 18, 2012 at just $ 38 per share. The share value of this social media icon has since grown nearly 10 times as it has grown into a huge technology and media force that boasts a staggering 2.85 billion monthly users worldwide. This reach provides powerful profit potential, but it also raises the attention of users and politicians amid fears of misinformation and privacy.
This creates an interesting dynamic for investors, as the reality that it is already reaching about one in three people in the world (based on internal user metrics, anyway) means that Facebook may have to find a way to increase income or increase income for others. way. than adding more people to existing platforms.
A look at Facebook’s geographic segments shows quite clearly the future path of growth for this company. Facebook reports more than 250 million users in the US and Canada, but census data only show about 210 million US residents aged 18 and over. Even if some of these accounts are duplicates, fakes, or just noise, the general reality of this dynamic means there aren’t many people left to sign up.
That said, while the company’s social media presence in the US and Canada remains its smallest user segment when measured by people, and admittedly faces challenges when it comes to future growth, the region is actually a gem. crowns because of how much revenue each user brings.
In particular, while less than 10% of its user base is located here, the company generates about three times more revenue in Europe and almost 18 times more than its worst segment, the rest of the world.
In this regard, it’s worth noting that the overwhelming majority of Facebook’s revenue comes from the ads it posts on its platform. The company’s ad sales last quarter were $ 25.4 billion, as it received just $ 732 million from “other” streams, including Oculus VR hardware, payments, and several other non-core businesses.
While its “other” segment is growing faster, the massive 46% growth in the already dominant advertising business means it matters the most to investors. And, as mentioned, since this existing ad business is based on valuable users in the developed world, the future of Facebook stock depends on international growth, increased profits, or a jump to new products and services that can significantly propel the needle into its “others”. “Segment.
Pricing ability and profitability
Facebook’s gross margin and operating margin is significantly higher than its closest social media competitors.
Gross margin is only the direct cost of doing business, while operating margin includes things like salaries and R&D. While it is perhaps understandable that Snap Inc. SNAP,
and PINS Pinterest Inc.,
have negative operating margins as they focus on fast growth, it is also important to note that they also lag significantly behind gross margins, which exclude these large investments and expense items.
However, they are closing the gap as Facebook margins are stable and both SNAP and PINS users grow. (Pinterest users are up 30% year-over-year, and Snap users are up 22% in the first quarter. Twitter Inc.’s TWTR.
operating margin improved significantly). As stated earlier, Facebook is mature and has a critical mass of users, so it’s natural to see more stable gross margins – although it’s good for investors to see that gross margins aren’t just flat or declining, but are up slightly from the same period last year in the first quarter.
Free cash flow
Free cash flow is becoming an increasingly important figure for investors because it is a measure of how much money a company has left after paying for regular transactions. And, perhaps unsurprisingly, given the fact that Facebook has a huge and lucrative user base, there are no competitors here either.
Here are the specifics of how Facebook compares to peers on social media when it comes to free cash flow per share in the past 12 months versus 12 months a year earlier, as well as the ultimate 12 month free cash flow return. based on stock prices at the close of April 30:
A modest 1% decline from last year is not ideal. But given that everyone but Pinterest saw the breakup too, this isn’t necessarily the end of the world.
Inventory assessment and performance
Some believe that old-school valuation metrics of the past are not relevant to the next generation of social media or technology stocks. It is important to note, however, that even by these traditional standards, Facebook is not overrated, even if you use the calculations of yesteryear, although this is a relatively new technology-driven stock.
Specifically, Facebook’s price-to-earnings (P / E) ratio is 24.4, based on consensus estimates of analysts surveyed by FactSet for the next 12 months. The forward P / E for next year’s earnings forecast is only about 25, while the forward P / E for the S&P 500 Index SPX.
is 21.9. Forward P / E ratio for the high-tech composite Nasdaq COMP,
So not only is Facebook’s P / E ratio in line with the broader market and well below its peers, it’s especially reasonable given that the growth story could lead many investors to rate Facebook slightly higher than dubious other stocks. sectors.
Here are the P / E estimates for Facebook and its peers, based on the consensus estimates of analysts surveyed by FactSet for the next 12 months, as well as the total earnings until April 30.
Wall Street opinion
If you follow the news, you won’t be particularly surprised to see the enthusiasm for Facebook on Wall Street. Given Facebook’s huge user base, best-in-class margins, and fair valuation, a whopping 86% of analysts consider this stock a buy, and overall the group is calculating double-digit growth potential over the next year based on agreed price targets.
Of course, those same analysts believe Pinterest and Snap could have more significant growth potential if things go well. But if you’re less interested in promising social media stocks and instead want to rely on a stable long-term leader, Facebook has a lot to offer.
Here’s a rundown of the views of Wall Street analysts surveyed by FactSet:
April 28 – Facebook just released its first quarter results.
May 26 – Facebook AGM.
Reporting by Philip van Dorn.