Facebook Inc (FB) Earnings: Can Growth Persist?

Rising social media companies

Facebook is increasingly competing with a number of younger and slightly different social media companies. The relatively newer social platforms like Yahoo! Inc. (NASDAQ:YHOO)’s Tumblr, Pinterest, Twitter, Snapchat etc. are all gaining momentum in terms of signing of newer users and keeping them engaged. However, Facebook’s user engagement is at very high levels. The number of daily users using Facebook on a daily basis has hit 60% which is much higher than earlier levels.

Earnings Consensus

Facebook is trading at high P/E multiples, and the company’s earnings miss or hit can lead to a lot of volatility in the stock price. The sell-side estimates for 2Q13 have an EPS consensus of $0.14, on revenues of $1.62 billion. Worth noting, Facebook is investing heavily for the long-haul, which might lead to margin compression in the next few quarters as well.

Going Forward

The company’s management is focused on building the company’s business for long-term growth. And the company has a number of untapped growth drivers to generate incremental revenue. The company’s Graph Search is still in the early innings and might drive revenues in the long-term. And also Facebook was the second most popular video platform in the U.S. with more than 61 million users, and only lagged Google Inc (NASDAQ:GOOG)’s video properties, which had more than 158 million viewers in June, according to comScore.

Facebook also has more than 16 million small business pages that it is monetizing, a great way to drive revenues from smaller businesses. The company now has more than 1 million advertisers on its platform, and those advertisers are likely to start showing video ads on Facebook’s News feed in the latter half of 2013. Facebook Inc (NASDAQ:FB) has a number of unrealized revenue streams that are likely to open up in the long-run and drive the company’s fortunes, independent of the company’s quarterly performance.

The article Facebook Earnings: Can Growth Persist? originally appeared on Fool.com and is written by Ishfaque Faruk.

Ishfaque Faruk has no position in any stocks mentioned. The Motley Fool recommends Facebook and Google. The Motley Fool owns shares of Facebook Inc (NASDAQ:FB) and Google Inc (NASDAQ:GOOG). Ishfaque is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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