This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Cramer's Action Alerts PLUS - See his portfolio and get alerts BEFORE every trade. Learn more NOW!

How Facebook Has 65% Upside

The virtual goods market, led by growth in purchases from companies such as Zynga (ZNGA - Get Report), lets Facebook diversify its revenue from strictly advertising. Facebook takes a 30% cut from the goods purchased on its platform, similar to what Google and Apple (AAPL - Get Report) do with their app stores. This market is expected to reach $14 billion by 2016.

There are several caveats Facebook investors should be aware of, however, including slowing growth, sequential decline in revenue, and potential challenges in China.

Bhatia notes that carving out a firm presence in China is difficult, as Google has shown. Compliance with Chinese regulatory authorities, for example, is difficult and addressing Chinese culture poses challenges, particularly in the face of incumbents such as Renren.

Facebook has said that it wants to touch each of the world's 2 billion Internet users. It already has over 900 million users, so there's potential for 1.1 billion more, or just over half of the world. "While we expect Facebook to benefit from an increasing base of internet users and to be able to achieve higher penetration rates of internet users, the hyper growth of past years is unlikely to be matched simply due to the law of large numbers," Bhatia said in his note.

Then there are the concerns about slowing revenue growth. Facebook said that revenue grew 45% year-over-year in its first-quarter, but that was down from 55% in the fourth quarter 2011 and 104% in third-quarter 2011. This could be a seasonal decline, but it's something investors will need to be aware of, especially given the hype surrounding Facebook.

Facebook is starting its roadshow for its IPO and is expected to go public late next week, either May 17 or May 18.

Interested in more on Google? See TheStreet Ratings' report card for this stock.

Check out our new tech blog, Tech Trends. Follow TheStreet Tech on your wireless devices.

-- Written by Chris Ciaccia in New York

>Contact by Email.

2 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Try it NOW
Only $9.95
Try it NOW
14-Days Free
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG
ZNGA $2.41 0.00%
AAPL $126.41 0.00%
GOOG $575.33 0.00%
RENN $2.52 0.00%
FB $81.21 0.00%

Markets

DOW 18,135.72 +38.82 0.21%
S&P 500 2,101.04 +2.51 0.12%
NASDAQ 4,982.8090 +15.6680 0.32%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs