Facebook Inc (FB) Ramping up Mobile Monetization

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Yahoo! Inc. (NASDAQ:YHOO) is another company that relies on advertising for a sizable portion of its revenue, and this company too has been struggling with mobile monetization. While the company beat convincingly on earnings, revenue showed a 7% decline as competitors are increasingly eating up Yahoo! Inc. (NASDAQ:YHOO)’s advertising market share, especially in mobile. As a result, the company has been investing heavily in advertising acquisitions, recently picking up mobile advertising startup Admovate. CEO Marissa Mayer has reaffirmed her commitment to growing in mobile, but it remains to be seen how well Yahoo! Inc. (NASDAQ:YHOO) manages to capitalize on this segment.

Valuations and Metrics

Facebook Inc (NASDAQ:FB) is a horrendously expensive stock at the moment, looking at current valuations. It trades at 724 times trailing earnings, and at 11.68 to sales. The forward P/E is a little more reasonable at 42.72, but still quite high. The return on equity is surprisingly low at only 0.77. The company has plenty of cash on the books, and relatively little debt. The stock’s sky-high valuation doesn’t seem to scare off bullish investors, but I personally am rather cautious.

The Bottom Line

There is no doubt that Facebook had an excellent quarter. The company not only beat on EPS and revenue, but also showed that its efforts to increase mobile ad monetization are paying off. In fact, the company seems to be doing a lot better than the competition in growing its mobile ad revenue. While the stock still looks somewhat overpriced, the optimism surrounding the company may fuel a continued rally.

Daniel James has no position in any stocks mentioned. The Motley Fool recommends Facebook, Google, and Yahoo!. The Motley Fool owns shares of Facebook and Google. Daniel is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

The article Facebook Ramping up Mobile Monetization originally appeared on Fool.com is written by Daniel James.

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