3 of Wall Street's Future $100 Stocks

NEW YORK ( TheStreet) -- I'm not sure if you're allowed to say this on the Internet, but times do exist when you've got to go all HBO on people to illustrate the appropriate impact: Kleiner Perkins partner Mary Meeker absolutely kicked ass with her Internet Trends presentation on Wednesday at All Things Digital's "D10" gathering in Palos Verdes, Calif.

Because I could hardly do Meeker justice and also because you need ample time and the proper environment to digest her slideshow, I will not get too deep into the details. Later tonight, relax with a few Guinness pints (or whatever does it for you) and dissect her entire talk, point-by-enlightening-point.

In this article, I pull Meeker's key insights regarding the growth of mobile and mobile monetization. Someday we'll look back on the doubt surrounding companies that rely on mobile users and it will all seem funny.

Explosive Growth Portends Explosive Growth

Just to qualify . . . I am taking Meeker's data, presenting it objectively and then running with it. I am not sure at which juncture she departs from my thinking, but my guess is it's somewhere around where this article's headline idles. In any event, I connect some dots that Mary may or may not agree with. I would love to know.

Meeker used Apple ( AAPL) to detail something we all sort of know, but may not realize the magnitude of until we see it sketched out: iPad adoption dwarfs the pace at which consumers took to iPods and iPhones. In fact, according to Meeker, over the first eight quarters of each product's life, iPad growth outpaced iPhone growth by three times.

Meeker than detailed the explosive growth in mobile Internet traffic as well as an exponential increase in mobile monetization. A clear correlation can be expected between the Apple adoption numbers and mobile uptake.

She cautions, however, that a majority of mobile revenue comes in the form of revenue generated from apps (71%), not advertising (29%). While projecting a $20 billion opportunity in domestic mobile ad revenue alone, Meeker concedes that desktop CPM, today, dwarfs mobile CPM by nearly five times.

For example, Zynga ( ZNGA) generates roughly five times more revenue per user on the desktop than it does via mobile. A relative pioneer in mobile -- thanks largely to Apple's iPhone -- Pandora's ( P) gap stands at a respectable 1.7 times more desktop ARPU (average revenue per user) than mobile APRU.

After showing how the lag time between mobile usage/clicks and monetization puts a drag on revenue at Google ( GOOG) and Facebook ( FB), Meeker argues that it's likely just a matter of time before mobile monetization equals revenue generated on the desktop.

She then drives the preceding points home with a force so strong even Jim Balsillie could comprehend it. Let's consider a few of the keys from Slide 25 of Meeker's already-epic talk:
  • In her words, "Desktop Internet Proved Ad $ Follow Eyeballs, it Just Takes Time."
  • Meeker shows APRU at $9 on the desktop in 1995; $49 in 2011.
  • She argues that "Mobile monetization has more going for it than Early Desktop Monetization had ..."
  • More rapid user growth on mobile.
  • Rapid growth of mobile e-commerce.
  • Meeker believes mobile monetization levels in the US could pass desktop numbers within 1 to 3 years.

That last point is worth repeating: Mobile monetization levels in the U.S. could pass desktop numbers within 1 to 3 years.

If Meeker did not put the writing on the wall for the world with her presentation, nothing will.

Back to the Future

Simply put, companies like Apple, Google and Amazon.com ( AMZN) represent stocks you wish you had bought two, three, five, 10 years ago. (Good work if you did).

You have to do what best suits your situation as an investor, parent, spouse and human, but I am not letting the next phase pass me by. While I collected profits on stocks like AAPL and AMZN on the way up, I would have much rather bought on a regular basis and held while cynics doubted their collective ability to reshape society.

That's exactly what Facebook, Zynga and Pandora are doing. They're changing the way we interact and consume entertainment in different parts of our independent and shared worlds. It's beyond powerful. The more I write about the incredible mobile transformation taking place across the globe, the more bullish I get.

Some readers will squawk because I do not attach a whole slew of quantitative metrics to my prediction that FB, ZNGA and P will become $100 stocks. As TheStreet's Marek Fuchs likes to say, they just don't get it!

The concept of valuation, particularly the various measures of it, means very little in practice. It might have in your grandfather's stock market, but not this one.

How can you reconcile trailing 12-month P/E ratios of 14, 173 and 72 for AAPL, AMZN and FB, respectively? Or forward P/Es of 211 and 16 for P and ZNGA? You cannot. They're all over the board.

Pull up almost any statistical gauge of valuation and you come to the same conclusion: This makes absolutely no sense. That's what tends to happen when something becomes irrelevant.

You see the same thing taking place within a growing number of academic disciplines -- the move from quantitative to qualitative research. Or, at the very least, the use of qualitative data to better color quantitative results. This method also works in reverse.

Investors need to do the work to understand the stories that color a space or a particular company's narrative. That's where you find some consistency. And that's where the bull case exists; not in an MBA's tabulations. Numbers can complement the story, but they do not write it. People do.

As powerful as the stock market is, it cannot cause wild, day-to-day gyrations in a solid company's business model or how customers use a product or service like it can with its valuation. Facebook might lose $5 billion in market cap in a week, but don't expect Mark Zuckerberg to pull a Reed Hastings and change direction on an almost as frequent basis.

Visionaries like Jobs, Bezos, Zuckerberg, Pincus and Westergren not only stand several steps ahead of most others, they prepare their companies well to hit each signpost along the way. I've got my money on the final three as they continue to position their companies to take the lead as the mobile arena frantically emerges and our social, on-demand and personalized world continues to develop.

Two, three, five, 10 years from now, I do not want to lament having missed out on the companies that ended up being the next Apple, Google, or Amazon.
At the time of publication, the author was long FB, P and ZNGA.

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