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Facebook's Hidden Jewel Proving to Be Boon for Shareholders

Stocks in this article: FB MSFT INTC ARMH

NEW YORK (TheStreet) –– Though Facebook's (FB) advertising business is growing like weeds in an untended garden, the social media company's lower profile Open Compute Project is proving to be a genuine windfall for shareholders, having saved more than $1.2 billion over the past three years, according to sources close to the situation.

Facebook's Open Compute Project, which the company first implemented in April 2011, has focused not only on the tremendous amount of data it consumes and analyzes, but has helped increased overall energy efficiency while cutting costs. Facebook operates data centers in Prineville, OR., Forest City, N.C., Lulea, Sweden and is currently in the process of building one in Altoona, Iowa. 

Since it was founded three years ago, OCP has grown to include more than 150 official members and dozens of technology contributions from companies led by Microsoft (MSFT), Intel (INTC) and ARM Holdings (ARMH).

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Since April 2011, Facebook has saved enough energy to power 40,000 homes for an entire year. Carbon savings in that same period is the equivalent of taking 50,000 cars off the road for an entire year.

SunTrust analyst Robert Peck, who rates Facebook "buy" with a $72 price target, says the company's quarterly results will continue to be strong, and that new products are likely to give the stock a boost in the near future. Peck cited changes to the right hand rail ad formats, video-ad unit testing, the start of Instagram monetization and the announcement of its mobile Facebook Audience Network as among its next big products.

"We think these areas, plus further announcements will be instrumental in driving the next leg of growth for the company," Peck said in an analyst note.

Analysts surveyed by Thomson Reuters expect the company to earn 32 cents a share on $2.81 billion in revenue.

Though Google (GOOG) is the leader in the digital ad market, accounting for some 32% of digital ad spending worldwide last year according to eMarketer, Facebook is gaining ground. Facebook accounted for 5.8% in 2013, as it generated $6.74 billion in advertising revenue in 2013 ($7.87 billion in total revenue). The worldwide ad market was $120.05 billion, and eMarketer expects it to grow another 16.7% this year to reach $140.15 billion.

Goldman Sachs analyst Heather Bellini, who rates Facebook a "buy" with a $78 price target, says there's a good chance for "upside risk" to consensus estimates, as Facebook continues to increase its share of the overall corporate advertising pie.

"Overall, our contacts say the Facebook ad budgets continue to grow meaningfully, with the number of advertisers increasing," Bellini wrote in a research note. "Furthermore, many have expectations for meaningful increases in ad budgets as they look into CY15."

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