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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Andrew Tonner has no position in any stocks mentioned. The Motley Fool recommends and owns shares of Facebook. Try any of our Foolish newsletter services free for 30 days. We Fools don't 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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