Why Facebook Inc (FB) Underperforms the Stock Market

Other alternatives

Because Facebook Inc (NASDAQ:FB) could take a while to better monetize social advertising, investors should consider other investment opportunities.

Google Inc (NASDAQ:GOOG) is a compelling alternative. The company is expanding internationally and has a whole host of products ranging from internet services, wearable computing, and software services hitting the market. Not to mention Google is turning YouTube into a paid for content site that could imply even further upside.

Analysts on a consensus basis anticipate Google to grow its earnings by 20.64% on average over the next 5 years. The company’s 25.9 earnings multiple is slightly expensive relative to growth, but it is still pretty reasonable in light of the company’s consistent history of growing earnings.

Amazon.com, Inc. (NASDAQ:AMZN) is partnering with Google to launch Amazon market place across 200 countries worldwide, which should help to increase application distribution. Amazon could earn some fees by providing an effective and large marketplace for application developers in developing markets.

Amazon is continuing to expand its retail services internationally, not to mention the company was able to grow its cloud services by 47.3% year-over-year in its most recent quarter. The company is doing an excellent job of expanding its cloud unit. Amazon’s cloud segment is still far from market saturation, what with AT&T Inc. (NYSE:T) projecting cloud to be a $210 billion market by 2017. We can also rely on Amazon’s ever-expanding international retail business for further growth.

Conclusion

Facebook Inc (NASDAQ:FB) was sold off because the company favored heavy investment over intelligent spending. Now, I encourage companies who want to invest into growth, but it should be done methodically.

Google and Amazon are attractive alternatives, but if investors are patient, Facebook could turn around its company’s stock performance by doing a better job of cutting costs and investing cash intelligently.

Alexander Cho has no position in any stocks mentioned. The Motley Fool recommends Amazon.com, Facebook, and Google. The Motley Fool owns shares of Amazon.com, Facebook, and Google.

The article Why Facebook Underperforms the Stock Market originally appeared on Fool.com.

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