It's hard to believe that Facebook's (NASDAQ: FB) botched IPO happened less than three years ago. Back then, it was hard to find anyone in the investment community who had something nice to say about owning the company's stock. But since bottoming out in 2012, Facebook's stock has more than tripled in value, thanks in large part to fantastic growth in Facebook's advertising revenue, especially on mobile devices. Over the last 12 months, revenue growth clocked in at 62%.
And while that might sound unbeatable, three Motley Fool contributors discuss companies growing faster than Facebook with the potential to eclipse the social network titan: Twitter (NYSE:TWTR), Qihoo 360 (NYSE:QIHU), and Take-Two Interactive (NASDAQ:TTWO).
Joe Tenebruso (Twitter): The past year has not been kind to Twitter or its shareholders. Whether it's slowing user growth, declining engagement, or questions about management's competence, Twitter bears have had plenty of negatives to feast on. Recent insider selling hasn't helped, either.
Yet through the first three quarters of 2014, Twitter's revenue surged more than 118%. Even amid all the turmoil surrounding the stock, I expect the torrid growth of the business to continue as Twitter's new initiatives to expand its user base and better monetize its audience take hold. That's because Twitter is rapidly becoming the place for real-time news and conversation for hundreds of millions of people around the world. Dollars follow audience, and as Twitter expands its global reach and strengthens its targeting tools, advertisers should continue to flock to its network.
After a 40% decline in 2014, Twitter's valuation is more reasonable now than it has been for most of its time as a public company. At more than 100 times forward earnings estimates for 2015, Twitter remains an aggressively priced stock, but I still believe value can be found in its shares.
I also envision multiple ways the market might realize Twitter's true value in the years ahead: (1) CEO Dick Costolo and his team's current strategy delivers impressive results and renews Wall Street's confidence in the business and its leadership; (2) a management shake-up brings new excitement to Twitter's stock and its future prospects; (3) Twitter is bought out by a larger business such as Google (NASDAQ:GOOG) (NASDAQ:GOOGL) looking to acquire a strong presence in social media.
With so many ways to profit, Fools might wish to consider purchasing shares of Twitter today.
Brian Stoffel: (Qihoo 360): For most of its life as a company, Qihoo 360 has been focused on providing Internet security and anti-virus software to computer users in mainland China. But the move that really got investors interested was the company's 2012 entry into the search market with a search engine of its own.
Over the last 12 months, Qihoo has grown its revenue by an eye-popping 113%. It's important to understand where this revenue growth has come from, as the company is basically split into two segments. The first is online advertising revenue -- which is where search and free security products exist -- while the second is "value-added services" -- which come from the company's PC and mobile gaming platform.
Here's how those two segments have performed since 2011.
As you can see, while the advertising revenue has grown rapidly (84% per year), the gaming platform has really juiced Qihoo's returns -- growing at an astounding 146% per year!
That's going to be an important distinction for investors to realize moving forward. Many are focused on Qihoo's search market ambitions, and note that while the company has made headway in PC search, it remains light years behind rival Baidu (NASDAQ:BIDU) when it comes to mobile search.
That, however, might soon become background noise to the booming gaming industry in China, where Qihoo 360 has rapidly established itself as a cash-generating machine.
Tim Beyers (Take-Two Interactive): Could video gaming be more lucrative than social media? Open-world, online variants gained traction in 2014, allowing Grand Theft Auto V publisher Take-Two Interactive to grow faster than Facebook last year.
According to S&P Capital IQ, Take-Two's revenue soared 129.5% over the trailing 12 months, versus 62% for the social network. A long tail of sales for GTA V has boosted results, including ongoing sales to players of GTA Online.
Revenue from virtual currency and related online goodies jumped 45% in the third quarter, accounting for roughly 58% of digital sales. That is big growth that has translated into a Facebook-crushing stock return over the trailing 12 months.
Brian Stoffel owns shares of Baidu, Facebook, Google (A shares), and Google (C shares). Joe Tenebruso has no position in any stocks mentioned. Tim Beyers owns shares of Google (A shares) and Google (C shares). The Motley Fool recommends Baidu, Facebook, Google (A shares), Google (C shares), Take-Two Interactive, and Twitter. The Motley Fool owns shares of Baidu, Facebook, Google (A shares), Google (C shares), and Twitter. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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