NEW YORK (TheStreet) -- Facebook (FB) was dipping 1.54% to $69.75 at 2:39 p.m. on Friday despite the news that Instagram, which Facebook bought for $750 million in 2012, had reached a $100 million deal with Omnicom Group OMC.
Advertising Age reported that the two sides had reached a deal to allow Omnicom-represented brands to show advertisements on Instagram users' feeds. The two sides confirmed the partnership, Instagram's first with a major ad agency, but would not disclose the terms of the deal. Instagram noted in a statement the deal would not alter its advertising strategy and that the ads would be consistent with the user-generated content on the service.
According to the report, a given ad in a user's stream would be controlled so that it remains for an extended period of time (one executive said more than a day) even if the user logs out and in again.
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TheStreet Ratings team rates FACEBOOK INC as a "hold" with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:
"We rate FACEBOOK INC (FB) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. 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 and impressive record of earnings per share growth. However, as a counter to these strengths, we find that the company's return on equity has been disappointing."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- FB's very impressive revenue growth greatly exceeded the industry average of 16.5%. Since the same quarter one year prior, revenues leaped by 63.1%. Growth in the company's revenue appears to have helped boost the earnings per share.
- Although FB's debt-to-equity ratio of 0.03 is very low, it is currently higher than that of the industry average. Along with this, the company maintains a quick ratio of 11.46, which clearly demonstrates the ability to cover short-term cash needs.
- Powered by its strong earnings growth of 566.66% and other important driving factors, this stock has surged by 156.56% over the past year, outperforming the rise in the S&P 500 Index during the same period. Setting our sights on the months ahead, however, we feel that the stock's sharp appreciation over the last year has driven it to a price level which is now relatively expensive compared to the rest of its industry. The implication is that its reduced upside potential is not good enough to warrant further investment at this time.
- Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. When compared to other companies in the Internet Software & Services industry and the overall market, FACEBOOK INC's return on equity is below that of both the industry average and the S&P 500.
- You can view the full analysis from the report here: FB Ratings Report