Facebook Inc (FB): Instagram Video Equals InstaProfit

Buy Amazon

Let’s be honest, we all love Amazon.com, Inc. (NASDAQ:AMZN). The company got plenty of headlines recently with captivating pre-order statistics and initial survey responses on whether or not Xbox One or PlayStation 4 is the superior console. My optimism in this company primarily stems from its involvement in Europe and the emerging markets.

Source: The World Bank

The World Bank estimates that the Euro Area could recover to a 0.9% gross domestic product growth rate in 2014, and follow that with a 1.4% growth rate for 2015. Amazon cited weakness from its European retail operation, which led to the international segment growing revenues by 16% year-over-year. Amazon.com, Inc. (NASDAQ:AMZN) has been able to grow sales at 32.72% on average over the past five years. The lackluster growth from its international operations is likely to improve if the World Bank forecasts are accurate.

The company’s primary growth catalyst is the cloud right now. Companies are trying to cut back on information technology spending, and one way to do this is to outsource networking solutions. This is where Amazon comes in with its remote servers for cloud hosting. Amazon.com, Inc. (NASDAQ:AMZN) was able to grow revenues from its cloud segment by 47.3% year-over-year.

Analysts on a consensus basis anticipate that the company will grow earnings by 37.15% on average over the next five years. The projections seem realistic based on the improving global economic outlook and the company’s growth rate from cloud hosting.

Conclusion

Google Inc (NASDAQ:GOOG) and Amazon are clearly better investment opportunities than Facebook Inc (NASDAQ:FB). After all, both companies have a proven track record of growing shareholder equity over time. Facebook, on the other hand, may have difficulty with this as the company has had problems maximizing the profit potential from its business operations.

Even so, Facebook Inc (NASDAQ:FB) is likely to grow in the future as the company provides the largest social network and has accomplished an economy of scale that no other company can realistically compete with. Over the short-term, I find it highly unlikely for the business to generate substantial earnings surprises. Given enough time, however, this company has the potential to become a web conglomerate as large as Google or Amazon.com, Inc. (NASDAQ:AMZN).

Alexander Cho has no position in any stocks mentioned. The Motley Fool recommends Amazon.com, Facebook, and Google. The Motley Fool owns shares of Amazon.com, Inc. (NASDAQ:AMZN), Facebook Inc (NASDAQ:FB), and Google Inc (NASDAQ:GOOG).

The article Instagram Video Equals InstaProfit originally appeared on Fool.com.

Alexander is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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