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3 Reasons Why Facebook (FB) Stock is Surging Today

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Facebook (FB) stock is soaring 14% higher today, and for good reason.  The company has seen record numbers on multiple fronts from its earnings which were reported yesterday.  Here are the top three reasons why the stock has been on a massive tear today.

Beating Expectations on Revenues and Earnings

Facebook posted revenues of $5.84 billion for the quarter.  This represents a 52% increase compared to the same quarter a year ago.  FB topped our revenues estimate by $485 million, representing a 9% surprise.    

Facebook also topped expectations with regards to earnings.  The company posted GAAP EPS of $0.59 after non-recurring items were excluded.  This represents an 84% quarterly increase year over year.  FB beat our EPS consensus estimate by 18%.

The Rise of Mobile Ads

Mobile advertisements now officially account for 80% of Facebook’s advertising revenue.  It’s worth noting that mobile ads also accounted for 77% of Facebook’s total revenue for the quarter. Mobile ad revenues have grown by 69% compared to the same quarter last year.  As people spend more time checking their social media accounts using their phones, Facebook will continue to benefit greatly.

Potential for more Growth

Facebook’s placed 29% more ads over the last quarter.  They’ve also increased their pricing by 21%.  Placing more advertisements while charging businesses more to put them on Facebook gives the company more potential to grow their ad revenues going forward.

Typically, a business will have to sacrifice their profit margins if they hope to gain more sales volume.  Also, increasing your price typically has an adverse affect on sales.  The fact that Facebook has been able to gain on a sales and price front shows how much of a demand there is to place ads on the social networking site.  This incredible demand should help earnings grow as the company moves forward.

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