Instagram Video Doesn’t Make Facebook Inc (FB) a Better Investment, Yet

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In the emerging markets, tablet devices are being seen as substitutes to traditional tower and laptop PCs. Search advertising is likely to trend higher, based on the fact that internet capable devices are projected to triple between 2010 and 2020. If that is the case, then the number of ad-sales, along with app-store purchases will grow exponentially. Google Inc (NASDAQ:GOOG)’s growth is predictable, whereas Facebook Inc (NASDAQ:FB)’s isn’t.

Yahoo! Inc. (NASDAQ:YHOO) is another compelling investment opportunity as the company provided guidance that non-GAAP operating income will grow from $566 million to $1.1 billion in 2013. Basically, the amount of operating income is projected to double. This will be driven by falling costs. The company has growth potential as it plans to buy out Hulu in order to become a major player in video distribution.

The stock currently trades at a 7.4 earnings multiple, which is inflated because of the $4.6 billion gain on the sale of Alibaba. This is what gave earnings a serious boost, which is why investors should focus on the forward earnings multiple (earnings multiple based on earnings that are one year out). The company has a 20.1 forward earnings multiple. The earnings multiple is reasonable when considering the projected growth of the stock.

Conclusion

I believe that Facebook Inc (NASDAQ:FB) will grow Instagram Video into a success, but there are factors that are inhibiting it from being as successful as it could potentially be. This will weigh on the minds of investors going forward. That being the case, both Google Inc (NASDAQ:GOOG) and Yahoo! Inc. (NASDAQ:YHOO) are likely to grow earnings at a consistent rate going forward.

Alexander Cho 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).

The article Instagram Video Doesn’t Make Facebook a Better Investment, Yet originally appeared on Fool.com.

Alexander 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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