Yesterday, Topeka analysts stated that Mark Zuckberg ‘did not indicate how FB plans to monetize the site.’ Mark Zuckerberg had sat down for an interview with Tech Crunch earlier this week. Nonetheless, Mark Zuckerberg seemed to impress the sell-side analysts (who were anyway bullish on Facebook), with his remarks. A few reports have come out on Facebook giving it some glowing reviews based on that interview.
JMP Securities re-iterates its outperform and a $37 price targer on Facebook Inc (NASDAQ:FB) based on Zuckerberg’s remarks. They note that although the stock is not cheap, its not super expensive like 1999 internet bubble stocks.
While the presentation lacked material specifics about plans to improve revenue growth, the fact that Zuckerberg appeared more focused on Facebook Inc (NASDAQ:FB) as a business rather than a college project will likely be viewed positively. JMP believes that most of the weakness in the stock over the past several months is due
to deteriorating investor sentiment and multiple contraction, rather than fundamentals. While it is difficult to call Facebook Inc (NASDAQ:FB) cheap, trading at 45x 2012 and 34x 2013 EPS, current expectations do not reflect any material mobile monetization contribution. They are currently modeling 2012 revenue of $4.92B and EPS of $0.46, vs. consensus of $4.93B and $0.49. For 2013, they are are modeling revenue of $6.37B and EPS of $0.63, vs. consensus of $6.32B and $0.63.
• During his presentation, Zuckerberg acknowledged that Facebook Inc (NASDAQ:FB)’s past mobile initiatives were disappointing, particularly since they were slow and he attributed the weakness partly to the company’s focus on using HTML5 for maximum platform compatibility. Additionally, Zuckerberg acknowledged that the company was likely slow to recognize the importance of mobile. Going forward though, Zuckerberg emphasized an increased focus on mobile app usability.
• Perhaps more importantly though, Zuckerberg appeared significantly more focused on generating revenue from mobile usage, noting that the integration of sponsored stories into users’ news feed is already driving improved engagement. During the presentation, Zuckerberg stated that he expects mobile revenue to eventually be larger than PC.
• Although not included in JMP’s current forecasts, they believe that FB could generate about $2B-$4B in worldwide mobile ad revenue by 2015, up from virtually nothing in 2012.
• In addition to an increased focus on mobile ad revenue, Zuckerberg discussed potentially entering the search market, which would place FB in more direct competition with Google Inc (NASDAQ:GOOG). This is not particularly surprising since Google Inc (NASDAQ:GOOG) launched Google+ as a way to integrate more personal preferences into its search results. Given: 1) that FB conducts about 1B searches per day, 2) the scope of OpenGraph, (3) the vast number of corporate Facebook pages, and (4) the roughly 20-30mins per day that the average user spends on FB, they believe the company already has most of the necessary components to implement an effective search strategy.
Oppenheimer analysts noted the same issues as JMP did, but to Oppenheimer’s credit they did not change forecasts based on Mark Zuckerberg’s remarks. Oppenheimer analysts stated ‘ While we prefer to publish research based on factual data points, we do want to highlight key aspects of the interview and the relevance of the iPhone to FB.’
That is how investors should think!
Disclosure: No position in any securities mentioned
