Facebook (FB) Stock Advancing on New Video Ads Feature

NEW YORK (TheStreet) --Shares of Facebook (FB) are gaining 0.72% to $86.41 on Tuesday after the company rolled out its new cost-per-view feature that offers marketers an option to pay for video ads only when they're viewed for at least 10 seconds, The Wall Street Journal reports.

Previously, marketers were charged on a cost-per-thousand impressions (CPM) basis when their video ads were instantly shown. However, marketers wanted to make sure that consumers were actually seeing their video, rather than quickly scrolling past it, the Journal noted.

In response, the social network introduced the new approach and marketers can choose to buy either on a CPM basis and a cost-per-view (CPV) option, where the view is a 10-second increment.

"Facebook ads are sold on an auction basis, so it's possible marketers will wind up paying more for the 10-second option," industry experts stated.

A Facebook spokeswoman said, "We strongly believe in giving marketers flexibility over how they buy video ads," according to the Journal.

Separately, TheStreet Ratings team rates FACEBOOK INC as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:

"We rate FACEBOOK INC (FB) a BUY. This is driven by a number of strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. 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, expanding profit margins, good cash flow from operations and solid stock price performance. We feel its strengths outweigh the fact that the company has had sub par growth in net income."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth greatly exceeded the industry average of 5.9%. Since the same quarter one year prior, revenues rose by 41.6%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • FB's debt-to-equity ratio is very low at 0.01 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with this, the company maintains a quick ratio of 7.97, which clearly demonstrates the ability to cover short-term cash needs.
  • The gross profit margin for FACEBOOK INC is currently very high, coming in at 94.44%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 14.45% trails the industry average.
  • Net operating cash flow has increased to $1,700.00 million or 32.29% when compared to the same quarter last year. Despite an increase in cash flow, FACEBOOK INC's average is still marginally south of the industry average growth rate of 41.55%.
  • Compared to its closing price of one year ago, FB's share price has jumped by 30.45%, exceeding the performance of the broader market during that same time frame. We feel that the stock's sharp appreciation over the last year has driven it to a price level which is now somewhat expensive compared to the rest of its industry. The other strengths this company shows, however, justify the higher price levels.
  • You can view the full analysis from the report here: FB Ratings Report

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