Time to friend Facebook

Investors can now like this previously hated IPO.

By TheStockAdvisors Jun 17, 2013 8:48AM

Facebook logo (© Daniel Acker/Bloomberg via Getty Images)By Geoffrey Seiler, BullMarket.com


We hated it when it went public at $38 a year ago, but a year later trading near $24, we're going to friend Facebook (FB), and we have added it to our Recommended List.


After a good quarter, Facebook has been under pressure due to concerns over user engagement, especially among teens and 20 somethings. Despite chatter about Facebook losing it's popularity, statistics provided by the company and third-party data providers show that Facebook engagement remains high and is growing in many markets.


ComScore published that 23% of all time spent on apps in the U.S. is on Facebook, and another 3% on Instagram (owned by Facebook), which equals 25%+ market share. Further, mobile users spend 80% more time on Facebook via mobile than the desktop.


Meanwhile, on the advertising front, from surveys we've gotten our hands on, most will admit that Facebook's platform is not perfect, but it is getting a lot better and they generally plan to direct more of their ad dollars towards the platform.


More importantly, the company has a lot of monetization tools in its tool belt, something that wasn't apparent when the stock IPO'd a year ago.


Since its IPO, new monetization efforts include newsfeed ads (ads directly integrated into the newsfeed); ad exchange (real-time, bid-based system); custom audiences (which allows marketers to "merge" their customer/prospect databases with Facebook’s database); special offers; app downloads; and partner categories. That’s a lot of innovation in a year's time.


From a valuation perspective, the company is trading at an EV/EBITDA (Enterprise value/Earnings before interest, taxes, depreciation and amortization) multiple of just over 11 based on 2014 estimates, which is cheaper than its Internet content peers, despite growing revenue at a faster clip.


Thus, we think the recent sell-off represents a good opportunity to buy a stock trading at below peer multiple that has a lot of growth levers to pull. We rate the stock a "buy" with a $32 target. It will have a "high" risk ranking.


More from TheStockAdvisors.com

0Comments

DATA PROVIDERS

Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.

STOCK SCOUTER

StockScouter rates stocks from 1 to 10, with 10 being the best, using a system of advanced mathematics to determine a stock's expected risk and return. Ratings are displayed on a bell curve, meaning there will be fewer ratings of 1 and 10 and far more of 4 through 7.

116
116 rated 1
284
284 rated 2
461
461 rated 3
671
671 rated 4
628
628 rated 5
618
618 rated 6
615
615 rated 7
495
495 rated 8
347
347 rated 9
115
115 rated 10
12345678910

Top Picks

SYMBOLNAMERATING
DYNDYNEGY Inc10
TAT&T Inc9
VZVERIZON COMMUNICATIONS9
EXCEXELON CORPORATION8
AAPLAPPLE Inc10
More

VIDEO ON MSN MONEY

ABOUT

Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.

Contributors include professional investors and journalists affiliated with MSN Money.

Follow us on Twitter @topstocksmsn.