Can these companies continue to monetizing mobile?

i20qUB6z

Picture Source: mobile.siliconindia.com

I wrote about two companies awhile back – both with stock prices that have been stagnant over the past quarter, and both with investors eager to see how the companies could monetize their mobile platform. Well, those two companies reported last week and the market has responded well to both Facebook’s and Baidu’s results with Facebook jumping 30% on their earnings release, and Baidu rising 15% before earnings, and 15% after earnings.

Facebook

Highlights compared to last quarter and YoY:

Metric Q2 2013 Q1 2013 % SEQ Q2 2012 % YOY
Daily Active Users (DAUs) 699M 665M +5% 552M +26%
Monthly Active Users (MAUs) 1,150M 1,110M +3.6% 955M +20%
Mobile MAUs 819M 751M +9% 543M +51%
Advertising Revenue $1.60B $1.25B +29% $0.99B +60%
Mobile % of Ad Revenue 41% 30% +9% 0% +41%

As an investor in Facebook, it’s hard not to like these numbers – everything is up – daily users, monthly users, mobile users, advertising revenue, and revenue from mobile.  Despite what many termed as “Facebook fatigue” over the past quarter the numbers certainly indicate the opposite – or at least the number of new users is increasing faster than those growing tired of Facebook.  This quarter’s earnings of $0.13 also give a more reasonable P/E of 65 (44 if you use non-GAAP earnings of $0.19).  With my options expiring at the beginning of 2014, I’ll be keeping a close eye out on these numbers and see if the company continues to improve these numbers.  Some future trades I’m already thinking about:

  • If growth/revenue slows or declines: sell my options
  • If growth/revenue continues to grow: exercise my options for shares or roll my 2014 calls into 2015 calls
  • If I feel market is not in love with the stock and share price is stagnant: sell 2014 calls at higher strike prices to collect some income while the shares bounce around

 

Baidu

As with Facebook, we’ll do some quarter to quarter comparison and YOY:

Metric Q2 2013 Q1 2013 % SEQ Q2 2012 % YOY
Revenue $1.232B $0.961B +27% $0.859B +39%
Operating Profit $473M $356M +31% $443M +3.2%
Net Income $431M $329 +29% $436M -4.5%

For those trying to follow the math at home, the percentages won’t quite work out right – I’ve got the numbers in USD, but due to currency fluctuations, it moves the percentages a bit.  So, for the percentages, I’ve used the reported numbers in RMBs.  Revenue was significantly up, but margins continue to be tightened from last year.

A couple of things seemed to get investors excited about Baidu despite very similar numbers to Q1:

  • Q3 revenue forecasts came in at $1.42 – $1.46B, above the estimated $1.35 from greater spending per advertiser
  • The company announced that 10% of revenues was attributed to mobile (vs. 0% in the past) – showing signs that their investments are paying off
  • Before earnings, investors ran up the stock 15% on news of Baidu’s deal for the country’s leading apps marketplace operator obviously showing the company’s seriousness in competing in the mobile space.

As I mentioned in my previous post, the company is showing progress, and margins are staying steady for now.  It also doesn’t seem like competition from Qihoo is biting into Baidu at least between quarters – or perhaps it’s because advertising in China is growing overall (with 1B+ people, maybe there’s enough space for two players).  Baidu’s acquisition doesn’t hurt it’s presence either.

 

I realized after putting the numbers down that the sequential numbers sometimes don’t tell us anything (in some cases a company’s revenues/earnings tend to be seasonal – historically rising in certain quarters, and lower in others).  Sometimes it can show a story over multiple years – quarter by quarter year over year shows growth.  I think what caught my eye is how much each of these companies’ share prices rose after earnings.  For Facebook, it seemed investors got back on the bandwagon and picturing the remaining five billion people on the planet getting on Facebook and for Baidu, it was signs that their investments in mobile started to show some contribution.

Either way, it looks like both companies have satisfied investors for now – and it’ll be a trend to continue watching.

 

Advertisements

2 thoughts on “Can these companies continue to monetizing mobile?

  1. Pingback: 2013 Portfolio Year In Review | Fearless Cal's Investment Journal

  2. Pingback: News for Today/Week (4-Feb-14): Apple, Facebook, Tesla, Michael Kors | Fearless Cal's Investment Journal

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s