Facebook Improved Financial Performance
Facebook Inc (NASDAQ:FB) posted vastly improved financial performance on the back of a strong showing in its mobile division. The social network said its first quarter revenues grew 38 percent to $1.46 billion as the company demonstrated early signs of its mobile strategy delivering results. Advertising revenues stood at $1.25 billion for the period, out of which nearly 30 percent was contributed by mobile.
This is still quite low when seen with the fact that nearly 67 percent of users access the website from their mobile handsets, though it nevertheless represents an improvement over 23 percent contribution during the last quarter of 2012. Profitability during the period grew to $219 million from $205 million in the same period last year.
Following the results, Facebook Inc (NASDAQ:FB)’s shares gained ground as analysts at UBS maintained their neutral rating on the stock but upped their target price from $26 to $28. The improvement in profits is not material, but this was not watched too closely. The focus was largely on mobile monetization and user engagement, with a view that profits will eventually follow. At the same time, the threat from humble messaging applications such as WhatsApp remains very real.
Reviewing Yelp results
Despite not making profits, Yelp Inc (NYSE:YELP) almost always had this aura around it that remained elusive for Facebook Inc (NASDAQ:FB) and most others. This was once again proven when the company presented its set of quarterly numbers. The online reviews site said its revenues jumped 68 percent to $46.1 million, surpassing all Street expectations. Mobile hogged the limelight at Yelp Inc (NYSE:YELP) as well, as the company said it launched mobile display ads during the quarter and garnered around 36 percent of local ads from mobile devices.
Yelp Inc (NYSE:YELP) is actually getting a head on competition from Facebook Inc (NASDAQ:FB), which launched competing features in recent months. Hard profits are still some way out for the company, but losses dropped to $4.8 million during the quarter from $9.8 million in the same period a year ago. It is true that barriers to entry in terms of capital spending are very low in the industry, but Yelp Inc (NYSE:YELP) has amassed the distinctive advantage of a huge user base. Any new player seeking to replace Yelp Inc (NYSE:YELP) will need to do a lot of work.
Sharing – the new mantra
Online photo-sharing service Shutterfly, Inc. (NASDAQ:SFLY) also reported an encouraging set of financial numbers. First quarter revenues grew 28 percent to $116.7 million from $109.7 million a year ago, surpassing Street expectations as more users opted for photo prints during the quarter. Even though net losses widened to $12.4 million during the quarter from $10 million in first quarter of 2012, it was better than projections of the company losing $15 million. Right after the results, brokerage houses raised their price targets on the stock.
Needham raised its target by $2 to $54, and so did Cantor Fitzgerald, which now has a target of $50. These indicate room for further growth from current price level of $44 – $45. The company has zero debt business operations and competes with Hewlett-Packard’s Snapfish, Webshots and other websites offering capabilities to share images and create photobooks, cards and albums.
Foolish bottom line
Traditional valuation metrics fail to do justice when it comes to valuing these new economy businesses and investors still need to trust their guts and some headline numbers to make investment decisions. Increased user base and the ability to monetize traffic remain the most important indicators. In this vein, Shutterfly, Inc. (NASDAQ:SFLY) scores the highest with its solid business model.
The article Internet Stocks Posting Strong Results originally appeared on Fool.com and is written by Jacob Wolinsky.
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