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In this segment of the Motley Fool Money podcast, host Chris Hill is joined by senior Fool analysts Jason Moser, David Kretzmann, and Jeff Fischer to weigh in on Facebook's (NASDAQ: FB) first-quarter report, which -- strictly by the numbers -- depicts a company not particularly injured by the data mishandling scandal that has dominated the news coverage of it recently.
Sales, active users, the balance sheet -- all are headed in the right direction. But the quarter was mostly over before the news broke, expenses are about to rise significantly, and there's a clear trust issue in play. What investors need to know is whether the stock is still a good value and whether it belongs in their portfolios.
A full transcript follows the video.
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This video was recorded on April 27, 2018.
Chris Hill: Let's move on to Facebook. First quarter revenue was a record high. Cash on the balance sheet, Jeff, has more than doubled in the past two years. This was one of those quarters that made everybody forget about Mark Zuckerberg's trip to Capitol Hill.
Jeff Fischer: [laughs] More or less, even though he opened the conference call with that. He said, "Our numbers were great, record high, but we have some bigger issues, some bigger fish to fry." But, to the cash balance, yeah, they're running at a $20 billion a year free cash flow run rate right now. Shares trade at about 25X that projected free cash flow. The sales numbers, sales were up 49%. Daily active users were up 13% to 1.45 billion. Monthly, also up 13% to 2.2 billion monthly active users.
My overall takeaway, even though expenses are expected to rise the rest of the year, up as much as 50-60%, is that I still like owning the stock. I would still be a buyer of the stock. The shares are inexpensive. The platform is proving extremely sticky. They're only still scratching the surface on ad revenue. Facebook, for example, has $45 billion in annual sales, almost all of it advertising. Google has nearly $120 billion in annual, mostly advertising, sales.
Meanwhile, the market just keeps growing larger and larger, and Facebook is taking more share, the ads are becoming more effective. They did make a point that advertisers have not left, that they do not ever sell your data, that advertisers can target you, but they don't know who you are. I think they're taking all the right steps -- I sure hope -- to make people trust Facebook again.