Facebook Has A 300 Billion Market Cap?

Facebook (FB) has been a favorite of growth investors and Wall Street since going public. While Twitter struggles and sees no growth in user base, however, Facebook continues to see its user base grow and its earnings as well. The company on Thursday saw its market cap exceed $300 billion. Making Facebook one of the last publicly traded companies in the United States. This rising market cap value was driven by larger than expected growth in mobile advertisement.

Even after crossing the billion mark with users, the company is still seeing double digit growth in users.
The reported 1.02 billion daily users or a 17% increase from the previous quarter last year. Facebook has 1.55 billion monthly active users or a 14% increase from the previous year. The company saw its mobile users base increase to 894 million or 27% increase from the previous quarter last year Wall Street analysts were expecting Facebook to report 1.5 billion monthly activist users.

The company reported its third quarter results on Wednesday. Facebook reported non-GAAP EPS of $0.57 cents or $1.63 billion on revenues of $4.5 billion for the third quarter. Facebook's third quarter results exceed Wall Street analyst estimates who expected revenue of $4.37 billion on EPS of $0.53 cents. On the other hand the company reported GAAP EPS of $31 cents 0r $896 million compared to last year of $30 cents or $806 million. The company saw its GAAP operating margins fell from 44% to 32% and share its no-GAAP operating margins fell from 57% to 54%. Facebook also saw total ad revenues rise to $4.3 billion and payments and other revenues were $200 million.

Facebook has successfully transitioned itself into a mobile first company. The company saw mobile ads make up 78% of ad revenues. More people access Facebook from their phone than their desk with average monthly users exceeding 1.0 billion people.

While on a conference call with an analyst, Mark Zuckerberg said, "We had a good quarter and got a lot done,” he went on to say, "We’re focused on innovating and investing for the long term to serve our community and connect the entire world."

The company produced free cash flow of $1.34 billion, while capital expenditures were $780 million. Facebook saw its cost of revenues increase from $526 million to $720 million in the third quarter. The company is finely monetizing Instagram which the company purchased for $1 billion in 2012. Facebook Chief Operating Officer Sheryl Sandberg discuss monetizing Instagram on the earnings call.

"This quarter on Instagram we introduced new ad formats and objectives, opened up our API, and launched self-serve ad capabilities. Instagram ads are now available in all countries where we offer Facebook ads, and marketers can manage campaigns across both platforms with the same targeting." Sheryl Sandberg

The expansion of ads onto the Instagram platform will contribute substantially to Facebook ad revenues base. However, the company isn't rushing to monetize WhatsApp, which it acquired in 2014 for $16 billion. WhatsApp has over 800 million monthly active users and is nearing the 1 billion mark. Facebook message and WhatsApp far exceed Twitter in user base. In the near future, the company will start to monetize the WhatsApp platform which will lead to massive revenues for Facebook.

When you look at the company's massive user base and large untapped potential for revenues, you are not shocked to see Facebook reach the 300 billion market cap. The company now has a larger market cap than some of the franchise blue chip companies like General Electric (GE). Facebook's market cap is only 30 billion short from Berkshire Hathaway's. Clearly the market and investors are seeing a bright future for Facebook as one of the largest company's in the United States.
Published on Nov 17, 2015
By Cody Eustice
Cody is a freelance writer who has been writing financial articles for various sites for over a year now. He is a value investor looking for companies that sell for far less than their estimated business value.

Copyrighted 2016. Content published with author's permission.

Posted in ...