This Day On The Street
Continue to site
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

Facebook Earnings Signal Apple iPhone 5 Rebirth

Other analysts upgraded Facebook's shares, citing impressive mobile results and a valuation more in line with the company's earnings trajectors. Mark Mahaney of Citigroup upgraded Facebook to a 'Buy', citing a better link between Facebook's fundamental earnings and its market value.

"What investors have for the first time since the FB IPO is fundamentals acceleration WITH a reasonable valuation," writes Mahaney in the upgrade, noting a price-to-earnings ratio of 30 and an earnings growth rate of 30%. Mahaney also highlights that growing fee revenue, in spite of a 9% decline in sequential revenue paid by Zynga, in concert with monetization efforts, minimize two of Facebook's biggest risks headed into earnings.

As with Yahoo!'s (YHOO - Get Report) Monday earnings , Facebook's quarter was seen by some as less about the numbers and more about a firmer vision for the company.

Specifically, the question was whether Facebook's usage and revenue generation trends could bolster its earnings outlook headed into 2013, regardless of whether top and bottom line numbers hit Wall Street estimates.

A strong investor reaction to earnings released after the market close on Tuesday indicates Facebook's been able to both impress Wall Street on earnings numbers and the company's overall direction.

After an initial stock surge after earnings were released, Facebook added to gains as executives detailed the beat on an earnings call with analysts, pushing shares over 10% higher on Tuesday evening. After a slew of analyst upgrades on, Facebook's shares continue to march higher, rising over 19% in Wednesday trading.

Facebook highlighted highly anticipated new platforms like Facebook Exchange and its rebuilt iOS mobile app as drivers of strong mobile growth on the earnings call. [Facebook Exchange lets advertisers tailor ads on the social network based on user interests and is seen as a key piece of monetization efforts.]

Zuckerberg attributed mobile ad revenue gains to Facebook's commitment to the platform and also said a faster iOS mobile app helped drive surging usage. "I want to dispel this myth that Facebook can't make money on mobile," said Zuckerberg on the earnings call. He also highlighted that Facebook will show continued improvement in mobile as the company focuses its efforts on other app improvements for Google Android devices.

Meanwhile, Sheryl Sandberg detailed how companies like Samsung and McDonalds (MCD) have seen success on the company's Exchange platform since a September launch, in comments that helped to push Facebook's stock higher through the analyst call.

The bull case on Facebook has long centered on the network's still-unquantifiable earnings prospects and its growing popularity, but investors should also take stock of obvious risks to the company's share prices through year-end.

In particular, Facebook faces a lockup expiration, where $1.2 billion of shares -- 700 million shares in total - could hit the stock market in the next three months, noted William Bird of Lazard Capital Markets, in a note prior to earnings.

For now, Facebook, has rewritten the script on its mobile efforts, giving investors and Wall Street analysts new reason to consider the stock after equity investors all-but left the social network for dead after its IPO.

For more on Facebook, see why the company's valuation shouldn't be a trick question on Wall Street. Also see why a venture capital investor suggests thinking long term on Facebook after its weak post-IPO performance.

-- Written by Antoine Gara in New York
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
Only $9.95
14-Days Free
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
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
AAPL $95.03 -2.90%
FB $116.73 7.20%
GOOG $691.02 -2.10%
YHOO $36.59 -0.97%
ZNGA $2.40 -1.23%


Chart of I:DJI
DOW 17,830.76 -210.79 -1.17%
S&P 500 2,075.81 -19.34 -0.92%
NASDAQ 4,805.2910 -57.85 -1.19%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs