Millennial Media, Inc. (MM), Google Inc (GOOG): How This Tech Stock Will Profit From Mobile-Ad Growth

Valuation

Millennial Media, Inc. (NYSE:MM) was not an investors’ favorite this year. The stock is down 35% year-to-date. The company is trading at a 19.4 forward P/E. The company has zero debt and a solid cash position. In fact, at the end of the first quarter cash accounted for 67% of company’s total assets. Earnings estimates for this year have grown 7.7% during the last 90 days, while earnings estimates for the next year have grown 16.7%. The changes in estimates reflect the trend of huge growth in the usage of mobile devices.

Google Inc (NASDAQ:GOOG) remains dominant in the online ad space. As Google Inc (NASDAQ:GOOG) has the ability to determine search results, it has the ability to drive ad rates up through competition. The stock is up 24% year-to-date and is trading at a 16.4 forward P/E. Analysts’ mean target price for Google Inc (NASDAQ:GOOG) is $935, but once it is reached everyone will be talking about breaking $1,000.

Facebook Inc (NASDAQ:FB) is down 11% so far this year. The stock is struggling to get back to its IPO price, but it looks unlikely in the short term. Mobile ads are the brightest point of Facebook Inc (NASDAQ:FB)’s monetization, but, in general, the company fails to extract the expected value from its huge user base. The stock is trading at a 30.8 forward P/E, but these estimates have yet to be met. The current P/E is 2,373, which indicates that at present Facebook is barely profitable. This is disappointing for investors.

Bottom line

Mobile usage is growing every month. Even people who have PCs in their homes are using mobile because it’s more convenient to relax on your armchair with a tablet than to sit behind your table where PC is usually situated. The growth of mobile usage is met by the growth of mobile apps. Those apps need monetization, and Millennial Media, Inc. (NYSE:MM) offers a platform that addresses this need. Competition is not sleeping, but the company can manage to settle in an appealing market niche. The stock has been beaten this year, but it’s surely worthy of your look.

Vladimir Zernov has no position in any stocks mentioned. The Motley Fool recommends Facebook and Google. The Motley Fool owns shares of Facebook and Google. Vladimir is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

The article How This Tech Stock Will Profit From Mobile-Ad Growth originally appeared on Fool.com is written by Vladimir Zernov.

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