Will Facebook’s New Focus on Revenue Boost Its Stock?
Facebook, which announced on Thursday it has reached 1 billion users, has increasingly been in the public eye and sharpened its focus on revenue. But one analyst cautioned investors against thinking that this would result in immediate gains for the company.
Regarding the company’s upcoming second earnings announcement, Ernst said it is hard to imagine that Facebook’s “business is not doing reasonably well,” judging from its public relations blitz and talks with investors.
Facebook’s press blitz includes a new video advertisement on the company’s page and recent press interviews with CEO Mark Zuckerberg and COO Sheryl Sandberg.
“The other thing I think is interesting is that they’re talking more aggressively about monetization — not just promoted posts,” Ernst said.
Before Facebook’s initial public offering in May, Zuckerberg said, “We don’t wake up in the morning with the primary goal of making money …"
This attitude seems to have changed.
“So they’re clearly now focused on revenues, whereas before I don’t think they were as focused on revenues,” said Ernst.
But investors should keep in mind that this change could take a year before they “really see this hitting the income statements.”
“I don’t think that investors should be looking for an immediate re-acceleration in revenues," said Ernst. "So I think that’s the thing to watch out for.”
Ernst said Facebook’s growth to 1 billion monthly active users — which translates to about a 25 percent year-over-year rise — was “pretty strong.” However, this milestone prompted Ernst to bring up Facebook’s Cupertino, Calif., neighbor Apple.
“I would point out though — Apple on their last number on iTunes accounts was over 400 million, which is up over 85 percent year over year, and they’re doing a lot more revenue per user at Apple than they do at Facebook,” he said.
—By CNBC.com’s Katie Little; Follow Her on Twitter @katie_little
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Daniel Ernst does not own Facebook stock.