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

1 Billion Reasons to Still Own Facebook

Some of Facebook's ad weakness can be attributed to declining demand in emerging markets. It is something that bears watching, particularly since it is the company's first reported decline. However, there were also some red flags in profitability. For instance, not only did gross margins eased a bit on a year-over-year basis, GAAP operating income declined 5%.

Granted, Facebook is still a young company and profitability issues are not considered material at this point -- I get that. But good cost management goes a long way. It's not as if Facebook started with a clean slate here. The company is still trying to restore respect and trust. There's no better way to earn "Street cred" than with solid books.

All of that said, Facebook has made some meaningful improvements. However, the company is not out of the woods yet -- and it knows that. Facebook understands it needs additional streams of revenue. Sponsored stories is one example, as are new advertisement formats. There is Graph Search, which has garnered plenty of attention.

The company is looking to combine its marketing database with Internet search and Boom! -- cash starts spitting out. Well, not quite, or at least not yet. It is not yet certain how effective this new feature will be. In time, Facebook will be able to figure it out. It is encouraging, nonetheless, that the company is looking for ways to increase value.

Investors shouldn't discount Facebook's ability to enter the corporate enterprise, a potential gold mine for the company and investors.

For example, if Facebook is able to adopt the enterprise benefits of Microsoft's Yammer by allowing employees to chat, share information and contact each other via private directories, Facebook's new corporate presence would then immediately rival that of LinkedIn (LNKD).

What's more, with the adoption of Facebook into Apple's (AAPL) mobile IOS as well as other investments made by Microsoft there are powerful allies in Facebook's corner. With one billion users now on hand, Facebook will have plenty of ways to make money. In the meantime, its growth trajectory puts its fair value at $40.

At the time of publication the author had a position in AAPL.

This article was written by an independent contributor, separate from TheStreet's regular news coverage.
Richard Saintvilus is a private investor with an information technology and engineering background and has been investing and trading for over 15 years. He employs conservative strategies in assessing equities and appraising value while minimizing downside risk. His decisions are based in part on management, growth prospects, return on equity and price-to-earnings as well as macroeconomic factors. He is an investor who seeks opportunities whether on the long or short side and believes in changing positions as information changes.
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
FB $94.12 -0.15%
AAPL $111.73 0.12%
GOOG $652.26 0.86%
TSLA $219.26 1.70%
YHOO $32.35 -1.60%


Chart of I:DJI
DOW 17,081.89 -49.97 -0.29%
S&P 500 2,014.89 +15.91 0.80%
NASDAQ 4,796.6090 -42.0340 -0.87%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs