NEW YORK (TheStreet) --Facebook (FB) - Get Report reported 2016 second quarter earnings that shattered analyst expectations after the close on Wednesday. The social media giant posted earnings per share of 97 cents, topping estimates of 82 cents and boasted impressive revenue of $6.44 billion, beating projections of $6.02 billion.
Managing editor for Recode Ed Lee joined CNBC's "Squawk Box" this morning to discuss what he found particularly interesting about the report.
"They're winning on all accounts. The thing that impressed me a lot with the second-quarter report, was their average revenue per user. They're taking more dollars out of each user, in terms of the value of each one," Lee said.
"That's interesting because Facebook is an advertising business," he said, mentioning that the sum of money they received in the second-quarter toppled what they got in the fourth quarter last year. Lee found this particularly interesting as the fourth quarter is "typically when advertising heats up," he noted.
Lee discussed Facebook's potential in the advertising segment and where the company may look in the future to raise the ceiling there.
"There's a ceiling to the amount of ads they're going to show people. The next step is then to get more people and charge more for ads, that's the only way they're going to grow on that front. That's also why they keep making the argument for brand advertisers," Lee explained.
Facebook wants to focus in on these brand advertisers in order to "get the TV ad dollars," as Lee put it. The move would shift the company's advertising dollars away from the direct response ads it currently uses and to larger brands.
Shares of Facebook are higher by 3.89% to $128.14 in pre-market trading Thursday morning.
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Separately, TheStreet Ratings rated Facebook as a "buy" with a score of B+. This is driven by a number of strengths, which TheStreet Ratings believes should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks TheStreet Ratings covers.
The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures, impressive record of earnings per share growth, compelling growth in net income and expanding profit margins. TheStreet Ratings feels its strengths outweigh the fact that the company is trading at a premium valuation based on our review of its current price compared to such things as earnings and book value.
TheStreet Ratings objectively rated this stock according to its "risk-adjusted" total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this articles's author. TheStreet Ratings has this to say about the recommendation:
You can view the full analysis from the report here: FB