Facebook (FB) Reconfigures Advertising Algorithms

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NEW YORK (TheStreet) -- Facebook  has rebooted plans to deliver advertising to third-party sites and apps based on a user's activity. Facebook halted tests nine months earlier, stating mobile advertising was its priority. Facebook's ability to monetize its base through targeted advertising has been a key priority for profitability since its IPO in May 2012.

The move would put Facebook into direct competition with Millennial Media , Google's AdMob and Apple's iAd.

Facebook also refined the way in which advertisers can target users through their News Feed. Hong Ge, Facebook's engineering manager for News Feed Ads, said in a statement that News Feed now takes marketer feedback into account.

"The goal of News Feed is to deliver the right content to the right people at the right time," Ge said. "To choose the right ad, we listen to both people and marketers."

Facebook shares were 1.69% higher to close trading at $51.24. The company topped $50 for the first time on Thursday. Overall, it led the S&P 500 which was down 0.41%.

TheStreet Ratings team rates Facebook as a Hold with a ratings score of C-. TheStreet Ratings Team has this to say about their recommendation:


"We rate Facebook a HOLD. The primary factors that have impacted our rating are mixed -- some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures and impressive record of earnings per share growth. However, as a counter to these strengths, we find that the company's return on equity has been disappointing."

Highlights from the analysis by TheStreet Ratings Team goes as follows:
  • FB's very impressive revenue growth greatly exceeded the industry average of 22.6%. Since the same quarter one year prior, revenues leaped by 53.1%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Although FB's debt-to-equity ratio of 0.18 is very low, it is currently higher than that of the industry average. Along with this, the company maintains a quick ratio of 10.22, which clearly demonstrates the ability to cover short-term cash needs.
  • The gross profit margin for Facebook is currently very high, coming in at 87.04%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 18.36% trails the industry average.
  • Powered by its strong earnings growth of 285.71% and other important driving factors, this stock has surged by 97.42% over the past year, outperforming the rise in the S&P 500 Index during the same period. Setting our sights on the months ahead, however, we feel that the stock's sharp appreciation over the last year has driven it to a price level which is now relatively expensive compared to the rest of its industry. The implication is that its reduced upside potential is not good enough to warrant further investment at this time.
  • When compared to other companies in the Internet Software & Services industry and the overall market, Facebook's return on equity is below that of both the industry average and the S&P 500.