Earlier this month, the market value of Facebook Inc. (NASDAQ: FB) surged past that of Exxon Mobil Corp. (NYSE: XOM) to push the social media giant to sixth in the rankings of the most valuable companies on U.S. stock exchanges. Of the top six most valuable companies, five are technology companies while just one — Berkshire Hathaway Inc. (NYSE: BRK-A) — is not, and Buffet’s company probably maintained its ranking on the strength of its latest investment in Apple Inc. (NASDAQ: AAPL).
Facebook beat fourth-quarter estimates for both revenues and earnings primarily on the strength of its mobile advertising dominance. Some 84% of the company’s ad revenues were generated by mobile ads.
Exxon was less successful, turning in a report that missed on both revenues and earnings. The energy giant took a $2 billion impairment charge in the fourth quarter, but even factoring that out its fourth-quarter results were not impressive.
Facebook’s rise has not only been impressive, it is expected to continue. Here’s an assessment from Merrill Lynch which raised its price target on the stock from $150 to $165 and reiterated its Buy rating:
Facebook is an investment in increasing social and mobile Internet usage, and also offers exposure to growing Internet usage in emerging markets. Driven by user growth, new product offerings, and new ad formats, we expect Facebook to gain share in advertising markets and grow close to 30% over the next three years, which warrants a premium P/E valuation and in-line P/E/G valuation versus its Internet peers.
In Exxon’s case, the company has already said it is going to have to write down the carrying value of its assets — the only question is by how much. Last week Exxon indicated that up to 3.6 billion barrels of its Canadian oil sands reserves are no longer profitable to extract.
Diminishing value for Exxon’s proved reserves could be temporary and the recent production cuts undertaken by OPEC and a few other large producers may boost prices for crude back to where the unprofitable barrels of reserves once again become profitable.
Alternatively, there is also the possibility that the world has reached (or is about to reach) “peak demand” for oil and barrels in the ground will stay there indefinitely.
As for Facebook, demand for its social media services and the company’s determination to branch out into new products designed to engage more fully its massive base of1.74 billion monthly active users could continue to drive growth at the company.
Facebook shares closed down about 0.2% on Friday at $133.53 in a 52-week range of $102.74 to $135.49. The stock’s 12-month consensus price target is $159.72 and shares have added 16% for the year to date.
Exxon’s stock closed down about 0.7% on Friday at $81.76 in a 52-week range of $79.76 to $95.55. The 12-month price target is $88.57 and the stock has dropped about 9.5% for the year to date and is the worst performer among the 30 stocks that comprise the Dow Jones Industrial Average.