Facebook Inc (FB), Starbucks Corporation (SBUX): Lifting the Cloud of Pessimism

Mobile

Despite growing mobile revenue from 0% of the company’s total to 30% in the span of a year, investors are still worried that the revenue stream isn’t growing fast enough. Mobile-only monthly active users have grown 128% in 2013, compared to 26% for total active users. With more people accessing Facebook exclusively through their phones and tablets, Facebook ought to be seeing better growth in mobile revenue.

Mobile ad rates continue to drag well below desktop ad rates, causing a drag on operating margin. Last quarter, operating margin fell to 26% compared to 36% in the same period a year ago.

But, mobile ad-spend is quickly growing, and more money is being funneled into content producers like Facebook than ad networks like Google Inc (NASDAQ:GOOG)’s AdMob.

Publishers controlled 52% of U.S. mobile display ad spending in 2012 compared to 39% in 2011. Facebook’s mobile display advertising revenue in 2012 — $234 million — was nearly as much as the $243 million Google Inc (NASDAQ:GOOG)’s mobile ad network brought in. Of course, Google also made more than $2 billion from mobile search ads.

Meanwhile, Facebook has been able to make up the difference. Advertising revenue was up 43% in the first quarter to $1.46 billion. That’s the company’s fastest growth rate since the end of 2011. Tough year-on-year comparisons may prevent it from reaching similar rates in the coming quarters, but Facebook is certainly growing ad revenue despite users moving to mobile.

In the long run, Facebook could make its own mobile display ad network. I believe the company’s acquisition of Atlas from Microsoft earlier this year will give it a leg up in both developing a network and increasing mobile ad rates. But, COO Sheryl Sandberg has indicated it’s not really a priority.

Growing concerns

Facebook is doing a great job of managing its problems, and turning weak points into strengths. It ought to be able to continue growing North American revenue at a moderate pace, while it expands rapidly in Asia, the Middle East, and Africa. Its mobile revenue growth is outpacing others in the industry, as average revenue per user continues to grow despite more people using mobile devices to access Facebook.

I believe the pessimism surrounding the stock has created another great buying opportunity for a company with smart management with plenty of capabilities to continue growing earnings.

The article Lifting the Cloud of Pessimism originally appeared on Fool.com.

Adam Levy owns shares of Starbucks. The Motley Fool recommends Facebook, Google, and Starbucks. The Motley Fool owns shares of Facebook, Google, and Starbucks. Adam 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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