Breaking Down Facebook's Earnings

In this video, Andrew Tonner reviews Facebook's latest earnings report. The company reported some impressive numbers: Monthly and daily active users increased more than 20%, and revenue increased 33%. But while Facebook as a business improved, income and earnings per share didn't keep up. Income grew only 7%, and earnings per share were flat.

Andrew points out two problems with the company as a long-term investment:

  • Its advertising model, so-called display advertising, isn't the best model to use. Andrew prefers click-through advertising for more consistent revenues.
  • The company sells at too high a multiple for its lackluster earnings growth. Some of Facebook's problems are temporary, but Andrew would like to see some resolution before investing.

For more details, check out the video.

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