Growing first quarter earnings
Recently, Facebook announced its impressive first quarter earnings results. Revenue experienced a year-over-year growth of nearly 38%, from more than $1 billion in the first quarter last year to nearly $1.46 billion in this quarter. The net income has also risen from $205 million last year to $219 million this year. The diluted EPS stayed the same at $0.09. What might make investors excited is the significant increase of 43% in its advertising revenue, from $872 million in Q1 2012 to nearly $1.25 billion in this quarter. Interestingly, Facebook Inc (NASDAQ:FB) has kept increasing the number of users significantly. Its daily active users rose by 26% to 665 million while the monthly active users (MAUs) increased by 23% to 1.1 billion. Interestingly, more and more users has utilized mobile for their Facebook’s activity. At the end of March 2013, the mobile MAUs reached 751 million, 54% higher than the same period last year.
LinkedIn Corp (NYSE:LNKD), with fewer users, has a much higher value per user
As Facebook has around 1.1 billion users, a market cap of more than $65 billion values each user at around $65 per user. Is Facebook Inc (NASDAQ:FB)’s user valuation cheap or expensive? LinkedIn Corp (NYSE:LNKD), the global largest social networking for professionals, had also experienced a great growth in both unique visitors and the number of users. Unique investors are considered as users who could be members or non-members and visited LinkedIn website at least once a month. In 2012, LinkedIn had around 126 million unique visitors, 50% higher than the number of unique investors last year of 84 million. In 2012, LinkedIn Corp (NYSE:LNKD) had nearly 202 million registered users. With nearly $21.3 billion in total market cap, each user of LinkedIn is valued at more than $105. Thus, each LinkedIn user is valued at a 61.5% premium to Facebook’s user.
That could be considered quite understandable, as LinkedIn’s users are mainly professionals. Thus, LinkedIn users seem to be stickier to the company’s services. Interestingly, LinkedIn generated most of its revenue, $523.6 million, or 54% of the total revenue, from the Talent Solutions segment. The Marketing Solutions segment accounted for 27% of the total revenue while the Premium Subscriptions segment represented around 20% of the total 2012 sales.
Yelp Inc (NYSE:YELP), generating losses but highest valuation
Yelp Inc (NYSE:YELP) operates in quite a different business model from both Facebook Inc (NASDAQ:FB) and LinkedIn. The company keeps connecting people with local businesses. In 2012, Yelp’s users have contributed around 36 million reviews for different places including restaurants, boutiques, café, plumbers, etc. Yelp Inc (NYSE:YELP) is truly considered the “word of mouth” online base on its review and rating model. Yelp reported that the number of average monthly unique visitors is more than 100 million as of Jan 2013. The number of monthly active users stayed at 84 million. As Yelp is worth more than $1.6 billion, the market values each user at $19.
Yelp generated most of its revenue, $109.16 million, or 79% of the total revenue, from local advertising. Brand advertising ranked second with nearly $20.6 million in revenue, accounting for 15% of the total 2012 revenue.
Facebook is trading at around $27.40 per share, with a total market cap of more than $65 billion. In terms of earnings valuation, Facebook seems to be quite expensive at nearly 35.2 times its forward earnings. The EV/EBITDA is as high as 47.76. However, with its fast growth, Facebook’s PEG is quite reasonable at 1.57. LinkedIn has the highest earnings multiple among the three. It is trading at nearly $195 per share, with a forward P/E of as high as 94.1. Its EV/EBITDA is nearly 161. The market values LinkedIn at 2.26 PEG, which already accounts for its potential growth. Yelp is generating losses, with the negative EBITDA. Thus, its EV/EBITDA is not valid. At $25.30 per share, Yelp is valued at more than 100 times its forward earnings.
My Foolish take
Yelp seems to have the lowest market valuation per user. However, its revenue source is much narrower than both LinkedIn and Facebook. Just think about this. Most of people will have Facebook account, then LinkedIn account, then Yelp. Among the three, Facebook Inc (NASDAQ:FB) seems to be the most decent pick due to its highest number of active users, its reasonable PEG ratio and the reasonable value per user. Moreover, Facebook is on the way to monetize the potential value of its huge valuable data.
The article Is Facebook a Buy Now? originally appeared on Fool.com and is written by Anh Hoang.
Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.
