Facebook In-Depth: Cramer’s Insights

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If there's a company that the market just can't seem to figure out, it's Facebook. Jim Cramer, however, has a handle on it.

"I have to tell you, in my opinion, the best earnings of the quarter came from Facebook," said the Mad Money host

Cramer realizes that, at first, his opinion may baffle some investors. The headlines from the latest Facebook release were at best lackluster. Facebook missed earnings estimates by a penny.

However, if you dig down into the earnings as Cramer did, he says you'll find a lot to get excited about.

First, he said that the earnings miss was caused by higher investment spending. "If you're going to miss that headline number, Facebook did it the best way possible," Cramer explained. "In other words, they are spending in order to grow the business."

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Looking beyond the miss, Cramer said earnings also showed many areas of strength: They include:
- User engagement reached 59.9%, an all-time record.
- Average revenue per user increased by 12% worldwide, with a 20% increase in the United States.
- Total monthly active users increased by 23% year over year, and by 5% from the previous quarter, to 1.11 billion.

That, Cramer finds impressive. And it's only the tip of the iceberg. Dig down into earnings and Cramer says you'll also find that Facebook has become very aggressive in mobile.

That's big.

"Right after Facebook came public, the stock got slammed because the company hadn't anticipated just how quickly people were switching from accessing the web on their desktop computers to using mobile devices," Cramer reminded. "Well, now Facebook is crushing it with mobile. In the quarter, mobile accounted for 30% of the company's total advertising revenue up from zero at this time last year. Mobile is up 250% in the last two quarters alone."

However, of all the positives, Cramer said what matters most to him is this - revenue growth is accelerating. (Revenue at Facebook rose 38 percent to $1.46 billion from the $1.06 billion booked in the year-earlier quarter, beating forecasts for $1.44 billion.)

"I haven't seen this kind of accelerated revenue growth since before the downturn," Cramer exclaimed.

And to make that accomplishment all the more impressive, he added that "it happened at a time when Facebook increased its expenses and investments by 56%."

That's relevant because Cramer believes at some point Facebook will be able to stop investing so heavily in growing the business. "When that happens, Facebook should have terrific operating leverage, meaning that somewhere down the road, all of this revenue growth is going to lead to an explosion in earnings."

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All told, Cramer believes that Facebook is nothing short of an old-fashioned secular growth story. And he thinks the stock is a buy at $28.

"Granted, it sells for 36 times next year's earnings estimates, but given the opportunities for expansion and the company's 29% long-term growth rate, that multiple doesn't strike me as being too expensive," he said.

"The growth is still a long, long way from being tapped out," he added. There simply aren't that many opportunities of this magnitude out there.

Disclosure: On May 3rd Jim Cramer owned Facebook on behalf of his charitable trust.

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