Facebook Inc (NASDAQ:FB) wowed the markets after close on Wednesday when the company announced that their mobile strategies were looking successful.
The announcement came in as quite a shock to investors when they learned that close to one-third of Facebook Inc (NASDAQ:FB) advertising revenue now comes from smartphones and tablets.
The Earnings
The announcement came as part of a quarterly earnings report from the social giant. Mobile revenue was not the only talk at the event as the company also announced that revenues were up some 38% year over year to just over $1.4 billion.
Net income also grew, by a rate of 6.8% to $219 million. That’s actually not that bad, although it doesn’t even begin to put a dent in that humongous P/E ratio.
How About That Mobile?
Mobile ad revenues at Facebook Inc (NASDAQ:FB) came out to be $374 million. Facebook specifically stated that this was 30% of all advertising revenues and that mobile saw a 22% growth over the last quarter.
I am not an avid user of Facebook Inc (NASDAQ:FB), but when I do use the service, it tends to be on a cell phone. I assume that there are a lot of Facebook users out there that are like me, which is why this is such a big deal to the company.
The types of mobile ads making the most money are those that are trying to entice the user to download another app. During the conference call, the company noted that more than 25 million app downloads were generated due to these ads.
Following Suit
Yelp Inc (NYSE:YELP) has approximately 9.2 million people that use their app on a monthly basis. These people are looking for places to eat, or somewhere to stop and grab a drink. In that sense, Yelp has an inherent advantage in that there users are opening the app and looking to buy.
Close to 25% of Yelp’s ads are those that are served up on their mobile platform. Perhaps greater emphasis on getting people out of the house, and on their phones could prove to be a great bonus to Yelp Inc (NYSE:YELP)’s business.
Groupon Inc (NASDAQ:GRPN) is another company who can benefit greatly from mobile, especially the Groupon Now feature that the app carries.
While it may be old news, over 30% of North American transactions at Groupon are completed on mobile devices.
Are They Investable?
That’s always a tough question for a guy like me, especially when we’re talking about the technology sector. See, I believe that companies such as Intel Corporation (NASDAQ:INTC), or International Business Machines Corp. (NYSE:IBM) could play out to be great investments over the long term, but these new companies are unproven.
Taking a company like Facebook Inc (NASDAQ:FB) into example, we can see that they are extremely overvalued. They’re trading with a P/E ratio in the thousands. I don’t even need to compare that to industry to tell you that it’s extortionate. Facebook would need every human on Earth, and some additional revenue per user in order to justify that P/E ratio, at least in my eyes.
When it comes to the analysts, they believe that Facebook is a winner. Six of the twelve analysts that are covering the stock say that you should buy it, and they even believe that the company will grow at some 33% per year.
Now on to Yelp! This $2.2 billion company sells advertising both on their website and on their mobile apps. Like Facebook, they’re expected to grow quite well into the future. The company’s five-year growth rate according to analysts is a nice 15%. That’s beating the S&P 500.
Groupon is expected to see better growth that Yelp, but it is without a doubt the most disliked company of the bunch. The highest rating they have from analysts is a ‘hold,’ not something we’re used to seeing in the fast-paced world of internet companies.
The growth we’re expected to see over the next five-years is around about 22.4%. That’s some incredible growth from a company that’s simply a ‘hold.’
Investor Takeaway
Out of the three companies I would opt for purchasing Groupon if I had to buy any at all. Groupon Inc (NASDAQ:GRPN) is the only company here that’s actually selling something other than advertising. They’re also doing quite well in the mobile space, selling 30% of Groupons via that method.
I could see why people would want to invest in Facebook but with some teens quickly losing interest, could gains in this stock just be a pipe dream? Of course, those same kids listed Instagram as their top social network, so Facebook is still collecting a big piece of the pie.
I would say Facebook is a hold, I wouldn’t rush out to buy it, but I may consider it sometime in the future when things are looking settled down.
Yelp is another holder for me. They do great work in providing revues to consumers, but their market could be easily wiped out if a company such as Google, or even Facebook decided to pursue it. I’d definitely tread with caution around Yelp.
The article Facebook Performs Well in Mobile: Time to Buy? originally appeared on Fool.com is written by Ash Anderson.
Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.
