Although revenue surged in its mobile segment, the social-networking giant will experience slowing growth in the future, says Morningstar's Rick Summer.
Rick Summer: Facebook announced first-quarter earnings today, which were really remarkable, once again. They came in at about $2.5 billion in overall revenue, 70% versus last year, so clearly taking a lot of share from some of the laggards like Yahoo, if you will.
Probably even more impressive, we are looking at mobile. Mobile revenues were 59% of total advertising revenues. So, in terms of a mobile juggernaut, clearly Facebook is there. They have fantastic assets that they are really leveraging that wide moat of their firm.
So, from a valuation perspective, though, we would really encourage investors to look elsewhere. We do think that clearly growth ultimately slows. These 70%-80% growth rates don't persist and the question is how quickly does it slow and over long time frame. We look at Google as being a much safer investment. At this level, it's a little bit more appropriately valued, and we would encourage new investors to look there.
