Less than a month ago, I wrote an article telling Energy and Capital readers that Facebook was undervalued. I suggest you give it a read…
Specifically, I told readers that Facebook shares would rebound close to their initial IPO price by the company’s next annual report.
And while some people may have thought I was crazy at the time, it looks like that has already happened. Facebook originally opened at $38, and it reached $34 today.
At the time I made this claim, Facebook was trading at $24.66, meaning shares jumped 38 percent since that time. Hopefully my words didn’t fall on deaf ears…
Notice the obvious spike: Facebook climbed more than 25 percent today, and here’s why:
Facebook released earnings this week and absolutely crushed expectations. Average estimates had put earnings per share at 14 cents, but that figure ended up being 19 cents.
In other words, Facebook beat revenue expectations by 35.7 percent.
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In case you’re wondering how, know that much of this is growth is attributable to mobile advertising.
Facebook’s mobile ads accounted for $656 million in revenue – that’s 41 percent of the company’s total ad revenue, compared to 30 percent in the first quarter.
Furthermore, active monthly mobile users are up 51 percent over the last twelve months, while active daily mobile users jumped 27 percent.
And while I did speak about the benefits of the mobile market for Facebook, my bullish sentiment for the company has also largely been a product of video advertising, which is on its way.
When Facebook implements video ads and monetizes Instagram, expect revenue to jump even further.
For those readers that heeded my advice, you may want to take profits now and re-enter at a better price – I honestly don’t see shares sitting at $34 for too long.
And while an immediate correction is likely, Facebook’s IPO disaster is very far behind.
This company’s future is looking brighter than ever.
Turning progress to profits,
Jason Stutman
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