Lombardi: Stock Market Commentary & Forecasts, Financial & Economic Analysis Since 1986

My Top Stock Pick in the Internet Space

Friday, February 7th, 2014
By for Profit Confidential

Why the Future Looks Bright for FacebookIt’s hard to imagine that Facebook, Inc. (NASDAQ/FB) just celebrated its 10th birthday after being launched from the dorm room of CEO Mark Zuckerberg at Harvard University.

Getting into Harvard is difficult in its own, but trying to grow a social media Internet company and pleasing Wall Street at the same time is an even more arduous job.

Yet here we are a decade later, and it looks like Facebook is well on its way as one of the top social media Internet stocks in the world. The next decade, if everything works out, should be exciting times for the company, Zuckerberg, and Facebook shareholders.

I’m impressed with what Facebook has been doing contrary to the soothsayers who said the company was doomed.

The stock is up 134% since my article in which I talked about how the share price was moving higher. (Read “Facebook Does an About-Face: Set to Move Higher?”)

Facebook, Inc. Chart

Chart courtesy of www.StockCharts.com

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Now it appears the Internet company is firing on all cylinders with its more than one billion subscribers. But, of course, there are questions regarding how many of the site’s one billion subscribers are actually active versus dormant.

At the same time, the company will need to constantly evolve and fend off emerging social media Internet rivals, such as Twitter, Inc. (NASDAQ/TWTR), to stay ahead of the curve. The social media Internet space is highly competitive.

However, the recent 2013 results suggest the company is faring well. Just look at the company’s financials, which are clearly pleasing Wall Street and turning some non-believers into believers:

In 2013, revenues came in at $7.87 billion, up 55% year-over-year, while earnings surfaced at $1.5 billion. Revenue growth in the fourth quarter was 63%.

Yet what makes me most excited about the results was the strong rise in mobile advertising, which I continue to believe will be the key for social media Internet companies going forward.

Facebook reported that its revenues from the mobile advertising area accounted for 53% of the total $2.34 billion from advertising in the fourth quarter. More importantly, that percentage jumped from 23% in the year-ago fourth quarter, which is a good sign.

As for its user base, in all, there were 757 million daily active users in December 2013, up 22% year-over-year. On a monthly basis in December, the average number jumped to 1.23 billion, with the mobile portion at a whopping 945 million, up 39% year-over-year.

My feeling is that as long as Facebook can continue to make money from its users; we can expect the share price to continue to rise for this Internet star.

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George Leong - Financial Planner, ConsultantGeorge Leong, B. Comm. is a Senior Editor at Lombardi Financial, and has been involved in analyzing the stock markets for two decades where he employs both fundamental and technical analysis. His overall market timing and trading knowledge is extensive in the areas of small-cap research and option trading. George is the editor of several of Lombardi’s popular financial newsletters, including The China Letter, Special Situations, and Obscene Profits, among others. He has written technical and fundamental columns for numerous stock market news web sites, and he is the author of Quick Wealth Options Strategy and Mastering 7 Proven Options Strategies. Prior to starting with Lombardi Financial, George was employed as a financial analyst with Globe Information Services. Add George Leong to your Google+ circles