Facebook Inc (NASDAQ:FB) shares soared more than 2.5% on Thursday after the social networking giant reported solid first quarter earnings on April 23. The social networking giant’s earnings almost tripled to 34 cents, beating the consensus forecast of 24 cents a share. Its first quarter revenues went up by 72% from $1.46 billion to $2.5 billion. Advertising revenue was up by 82% to $2.27 billion. And a staggering 59% of ad revenue came from mobile.
Anyway, Facebook Inc (NASDAQ:FB) is still a lucrative buy because, as Peter Cohan of Forbes puts it, the company has demonstrated that it can set ambitious goals and achieve them. Today, the consensus price target on Facebook stock is $77.76, representing more than 27% upside from Thursday’s close of $60.87. None of the 44 analysts covering the stock have an Underperform or Sell rating on the stock. Cohan says Facebook looks cheap even at the P/E ratio of 104, thanks to its immense earnings growth rate.
Facebook is snatching market share from Google, especially on mobile
Google Inc (NASDAQ:GOOGL) (NASDAQ:GOOG) still dominates the digital advertising market. But Facebook Inc (NASDAQ:FB) is eating into its market share, especially in the rapidly growing mobile advertising market. According to eMarketer, mobile ad spending will grow 78% to $32 billion in 2014. And Facebook is expected to increase its market share from 17.5% in 2013 to 21.7% in 2014. Meanwhile, Google’s share will shrink from 49.3% to 47%.
A big reason Facebook Inc (NASDAQ:FB) is gaining the market share is application install ads. It encourages users to install new apps or use the existing ones. Google Inc (NASDAQ:GOOGL) (NASDAQ:GOOG) is also gearing up to unveil a similar app install ad service, but it’s playing catch-up. If the social networking giant stays ahead, it will continue to snatch mobile ad market share from Google. What’s more, usage of Facebook’s mobile app is also improving. According to mobile analytics firm Mobidia, its mobile app usage has increased to 170 minutes per week per user, up from 160 minutes in November.
Facebook attracts users on new platforms
Mark Zuckerberg has made a number of acquisitions in the past few months. Facebook Inc (NASDAQ:FB) spent $19 billion to buy WhatsApp and $2 billion for Oculus VR. The Menlo Park-based company’s logic behind these purchases is to own platforms and services where people will be spending most of their time. And then the company can charge “economic rent” for advertisers who want to reach out to those users. The more individuals it reaches and the more time people spend on Facebook’s various platforms, the higher the opportunities for advertising.
Facebook Inc (NASDAQ:FB) has started monetizing Instagram. WhatsApp now has more than 500 million active users. And Zuckerberg expects Oculus VR to build its user base.
Facebook Inc (NASDAQ:FB) shares were down 0.38% to $60.64 in pre-market trading Friday.