Many short-term traders have made nice profits from Facebook Inc (NASDAQ:FB) thanks to the wild swings in its stock price. However, most long-term investors have been disappointed. Facebook IPO’d at $38, but it’s now trading at just $24. To make matters worse, this performance came during a time when the broader market continued its relentless ascent. Has the stock now been hit hard enough to make Facebook an attractive investment?
On the surface, this wouldn’t appear to be the case. Facebook Inc (NASDAQ:FB) is currently trading at 514 times trailing earnings and 31 times forward earnings. In other words, it’s still expensive, especially considering it only sports a profit margin of 1.22%.
Just to give you an idea of how unattractive Facebook is compared to one of its peers, Google Inc (NASDAQ:GOOG) is trading at 26 times trailing earnings, 16 times forward earnings, and it has a profit margin of 20.92%. It might already seem like Facebook Inc (NASDAQ:FB) should be discounted as an investment option. But there’s more to the story here.
Facebook’s improved earnings and revenue
Facebook’s stock is down 9.73% year to date, but three of the last five quarters have been profitable, including the last two quarters.
You might be thinking that many companies throughout the broader market have been improving their bottom lines due to cost-cutting. But Facebook Inc (NASDAQ:FB) has also consistently improved its revenue on an annual basis.
Furthermore, revenue improved last quarter by 37.80% year over year. A lot of this has had to do with Facebook’s mobile ad revenue, which now accounts for 30% of total revenue. Thanks to the increasing popularity of smartphones and tablets, Facebook’s mobile ad revenue should continue to grow.
Facebook’s improved traffic
Wasn’t Facebook Inc (NASDAQ:FB) getting stale? Wasn’t the younger generation opting for other social networking platforms? Unfortunately for Facebook, the latter might be true.
Younger audiences always want something new, because it represents their generation. Once a website becomes mainstream, it loses its “cool” identity. The most over-represented age group on Facebook is 65+. However, despite many younger people moving to other social networking platforms, Facebook Inc (NASDAQ:FB) has one again overtaken Google Inc (NASDAQ:GOOG) as the most visited website in the world.
That’s right. According to Alexa.com, Facebook is ranked No. 1 in the world and No. 2 in the United States. Those numbers are reversed for Google Inc (NASDAQ:GOOG) — it’s ranked No. 2 in the world and No. 1 in the United States. As long as Facebook remains the most visited or second-most visited site in the world, its monetization opportunities are phenomenal.
The most over-represented education group on Facebook Inc (NASDAQ:FB) is Graduate School, compared to College, Some College, or No College. According to the United States Census Bureau, the average annual salary for people with a master’s degree is $55,242 — 30% higher than the average annual salary for people with a bachelor’s degree, and 70% higher than the average annual salary for people without a college degree. Therefore, Facebook’s monetization opportunities are good.
As far as Facebook’s traffic for the past three months, users are viewing fewer pages per visit, but spending 11% more time on the site. It’s evident that Facebook Inc (NASDAQ:FB)’s content is interesting enough to keep people on the page.