Appaloosa Management and Facebook
Appaloosa Management exited its position in Facebook (FB) during the fourth quarter. The position accounted for 4.18% of the fund’s 3Q14 portfolio. The fund had held about 3.6 million shares of Facebook.
Facebook is a social networking channel with 1.39 billion total users and 890 million daily active users worldwide as of December 2014. The company generates substantial revenue from advertising and fees associated with its Payments infrastructure, which enables Facebook users to purchase virtual and digital goods from developers.
In 2014, Facebook acquired WhatsApp and Oculus to improve Facebook’s next generation of communication and computing platforms.
Mobile is the primary driver of Facebook’s growth, with 1.19 billion people accessing the site on mobile devices. The company’s Instagram, Messenger, and WhatsApp crossed 300 million, 500 million, and 700 million monthly active users, respectively.
You can gain exposure to Facebook by investing in the Technology Select Sector SPDR Fund (XLK). Facebook accounts for 3.82% of XLK.
During the fourth quarter of 2014, Facebook’s revenues grew 53% YoY (or year-over-year) to $3.9 billion. Ad revenue was $3.6 billion. Mobile ad revenue accounted for 69% of total ad revenue. GAAP (or generally accepted accounting principles) net income was up 34% YoY to $701 million or $0.25 per diluted share. Free cash flow was $1.07 billion.
In the fourth quarter, Facebook expanded auto play video ads, which saw many clients during the holiday season. The company rolled out Instagram ads in Australia and Canada. Facebook believes that “Instagram will become core to advertisers and mobile brand building efforts.” The company expects great results from brand marketers across verticals from insurance and tax to retail and entertainment.
Facebook also improved its Ads Manager product. The company relaunched Atlas to help marketers reach real people and measure results across multiple devices. Plus, Facebook invested in Audience Network, helping “marketers to extend their campaign off of Facebook, and LiveRail, which provides publishers the video tools to monetize their inventory more efficiently.”
Full-year 2014 results
Facebook’s revenue grew 58% to $12.5 billion in 2014. The company generated free cash flow of $3.6 billion. GAAP net income increased 96% to $2.9 billion or $1.1 per diluted share.
Appaloosa’s other 4Q14 positions
David Tepper’s Appaloosa Management initiated new positions and sold some existing positions during the fourth quarter of 2014. Appaloosa added a new position in American Realty Capital Properties (ARCP). The fund sold positions in some of its largest companies, including Citigroup (C), Halliburton (HAL), and CBS Corporation (CBS). Appaloosa also reduced its holdings in Delta Air Lines (DAL), Google (GOOG), and the Priceline Group (PCLN).
In the next part of this series, we’ll discuss Appaloosa’s exited position in Halliburton.