Facebook's Earnings and Thoughts

Investment Analysis Clubs Saul’s Investing Discussions
1

Today’s earning’s report really spiked Facebook’s 1YPEG. Here’s what we’re looking at:

Revenue (billions)	Q1		Q2		Q3		Q4
2013			1.458		1.813		2.016		2.585
2014			2.502		2.910		3.203		3.851
2015			3.543		4.042

EPS (non-GAAP)          Q1		Q2		Q3		Q4
2013			0.12		0.19		0.30		0.32
2014			0.34		0.43		0.43		0.54
2015			0.42		0.50

Current (7/29/15, 2015 Q2 Earnings):

Revenue Growth (billions)
2014 Q2 TTM Revenue = 10.013
2015 Q2 TTM Revenue = 14.639
Year Over Year Revenue Growth = 46.19%

Non-GAAP Earnings Growth (per share)
2014 Q2 TTM Earnings = 1.39
2015 Q2 TTM Earnings = 1.89
Year Over Year EPS Growth = 36%

P/E = (Check Current Price) 93.95*/1.89 = 49.71

1YPEG = 49.71/36 = 1.38

When I bought shares in May for an average of $80, the 1YPEG was 0.77. So 1YPEG has really spiked. Of course, so has the price! The good news from earnings is that active users continue to really spike. From the press release:

Second Quarter 2015 Operational Highlights

Daily active users (DAUs) - DAUs were 968 million on average for June 2015, an increase of 17% year-over-year.
Mobile DAUs - Mobile DAUs were 844 million on average for June 2015, an increase of 29% year-over-year.
Monthly active users (MAUs) - MAUs were 1.49 billion as of June 30, 2015, an increase of 13% year-over-year.
Mobile MAUs - Mobile MAUs were 1.31 billion as of June 30, 2015, an increase of 23% year-over-year.

I’ve posted my bullish thesis on Facebook before, but here’s the reader’s digest version: I believe they’ve just begun to monetize huge assets like Instagram, Facebook Messenger, and WhatsApp. Virtual reality platform Oculus also holds lots of potential though that is far from assured (in my mind). They’re dominating the mobile advertising space and even beginning to seriously threaten Youtube’s stranglehold on online video revenue. I also firmly believe political advertising will be a boon throughout 2016 and every election year hereafter.

I would also like to point out the rest of the social media landscape is reeling right now. Twitter cannot grow active users even though it is much smaller and Google has all but given up on Google+.

Facebook is spending a lot of money now to (hopefully) grow earnings later. The question is when “later” will get here. I would seriously welcome any thoughts and feedback.

  • Matt
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2

I meant to add the price used to calculate P/E and 1YPEG was the latest I could find in AH trading. It will probably open at a slightly different price tomorrow.

  • Matt
3

Today’s earning’s report really spiked Facebook’s 1YPEG.

Hi Matt, It was clear that with the slow-down in earnings growth quarterly, the TTM earnings growth would also fall precipitously, which is why I sold my smallish position to reinvest elsewhere. The stock may do just fine, I don’t know, but it’s not for me at the current time.
Saul

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4

Thanks for the response, Saul.

Yeah, growth is definitely slowing down and with the price already having increased I definitely need to reevaluate my holding in it. With the 1YPEG below 1, I was definitely comfortable holding it before, but with it having spiked so much, I am finding myself thinking it over quite a bit. Thanks.

  • Matt