Facebook Inc (FB): How Can Shares Get Back To Their IPO Price?

Facebook Inc (NASDAQ:FB)‘s growth in revenues has showed almost no signs of slowing down. And the company’s mobile engagement and monetization trends has been a major thumbs up for the company, and is making up a larger portion of the company’s total revenues. However, in spite of posting extremely solid numbers on mobile, investors at large remain skeptical of Facebook Inc (NASDAQ:FB)’s business prospects with the stock price largely flat.

Strong numbers

Facebook Inc (NASDAQ:FB)’s topline came in at $1.46 billion which represents a growth of 38% from the Q1 2012 sales of $1.06 billion. The company’s operating income for Q1 2013 stood at $373 million and net income for Facebook’s was $219 million. Facebook’s advertising revenues soared 43% on a year-over-year basis to $1.25 billion and now make up 85% of total revenues for the company.

The advertising growth was mainly driven by a 39% increase in the number of ads delivered along with a 3% increase in the price per ad. The portrayal of ads on News Feed on both mobile and desktop was instrumental for Facebook Inc (NASDAQ:FB)’s revenue growth, as it also increased the company’s price per ad significantly.

Advertising on mobile received tremendous traction making up 30% or ~$374 million in Q1 2013. Facebook’s revenues from desktop stood flat at $871 million from Q1 2012. However, it should be worth noting that advertisers want to display ads on Facebook Inc (NASDAQ:FB), and most of them don’t specify which medium to advertise in. Increased mobile usage led to more advertisements being placed on mobile devices. Revenues generated from payments and fees revenue for the social networking giant stood at $213 million which represents a 15% growth on a year-over-year basis.

Engagement is at an all-time high

Facebook’s user growth is still robust, as the company’s monthly user base increased 23% Y/Y and now stands at a whopping 1.11 billion, and 665 million of those users frequents Facebook Inc (NASDAQ:FB)’s platform on a daily basis. A major positive for Facebook in recent months has been the company’s mobile user-base and subsequent monetization. Facebook’s mobile MAUs stood at 751 million which represents a Y/Y growth of 54%.

User engagement measured in terms of the number of daily users as a % of total monthly users is at record levels in spite of wide-spread speculations by numerous newspapers that users are leaving in bulk.

Source:Company Data, Estimates

Facebook Inc (NASDAQ:FB) has managed to grow and stimulate user engagement almost every quarter from Q1 2009. It is rather evident that the company displaying more ads to users on PCs, or mobile is not impacting the end-user experience and doesn’t alienate users. Facebook’s rollout of ads on the News Feed has been a great monetization tool due to comparatively higher engagement than ads on the right hand rail, and these ads on News Feed have a much higher average price per ad as well.