5 Stocks Leveraging Facebook - Investment Ideas

Social media has taken the internet by storm over the past several years. While companies were a bit slow on the uptake, some have more than made up for lost time.

At first Facebook, Twitter and other social media sites were viewed as the enemy, sucking productivity from employees. But, as users grew by the millions, no hundreds of millions, some companies made the wise choice to jump on board.

What Does Facebook Actually Do?

As a relatively late comer myself, I never really saw the point of Facebook. While it may be oddly addicting, do I really need to know that some girl from high school is going to Mexico next month? Or about that friend of a friend who can't wait to go see some band I have never heard of?

But that isn't the point. The information flow is. I know more about my "friends" than I would have if it weren't for Facebook. And I know even more about those people that are my actual friends and family. And companies can use that information flow for their benefit.

How Companies Us Social Media

The bottom line is that social media has revolutionized the flow of information, no matter what you choose to convey. Can you equate it to the invention of the printing press or creation of the internet? Probably not, but it just might be closer than you think.

After companies saw how easily that information was passed around, it wasn't too long before they realized that it was a perfect targeted marketing tool. Community discussions, company news, exclusive coupons can all be easily and effortlessly delivered to millions.

Yes, a lot of that information received via social media is useless, but that is for the end user to filter out. I may have already forgot who was going on vacation and to where, or who is seeing what show, but I did remember to get a free bowl of Chipotle's new soup for being one of the first 50 customers!

These Guys Get It

Social media is ideal for retailers and service companies. They can target individuals easily and effectively. Here are 5 companies that have a loyal Facebook following, in addition to great earnings growth.

Chipotle Mexican Grill (CMG) has legions of loyal followers, with over 1.1 million "likes" on Facebook. Additionally, they have one of the most active fan bases on their page as well. If you have not been to this ethically delicious burrito chain, you are missing out.

Not only that, but the earnings outlook is great. After several upward estimate revisions in the past few weeks, Chipotle is expected to earn $5.43 when they announce 2010 results, and $6.63 in 2011. Those levels represent growth rates of 37% and 22%. Currently CMG has a Zacks #2 Rank (Buy).

Deckers Outdoor (DECK) may only have 58 followers on their Facebook page, but their wildly popular UGG Australia brand has over 650,000 fans. Teva is another well known brand in addition to a few others.

This Zacks #2 Rank (Buy) is expected to report a 25% growth rate in 2010 and another 13% this year. Also, according to the PEG ratio of 0.8 times, the growth rates are priced at a discount.

Netflix (NFLX) clocks in at over 600,000 fans on its primary Facebook page. While social media changed the way we convey information, this company changed the landscape of home entertainment.

This year's estimates are fluctuating and currently down about a penny in the past month. But the $2.81 analysts are expecting is good enough for a 42% improvement over 2009's earnings. Next year's consensus is up a nickel, to $3.90, which puts projected growth at 39% for this Zacks #2 Rank (Buy).

Under Armour (UA) may have started out making athletic wear for collegiate athletes, but now the company's offerings are worn by everyone from professional ball players to veteran couch potatoes.

With just over half a million Facebook followers, the company has done a good job of capitalizing on its brand loyalty amongst its customers.

Under Armour is expected to have grown 36% when it announces full-year 2010 earnings. Next year analysts are looking for another 25%. Thanks to the upward estimate revisions and excellent surprise history, UA has a Zacks #2 Rank (Buy).

lululemon athletica (LULU) is currently a Zacks #1 Rank (Strong Buy). They might not have the most followers, at 283,000, but those that do are loyal. The company sells top-of-the-line yoga gear that has gradually made its way into everyday wear.

The company has about 100 locations across the Canada, the U.S., Australia and Hong Kong. Since their brick and mortar footprint is relatively small, marketing through social media is a perfect outlet to target those potential customers in less populated areas.

lululemon raised its guidance recently, leading to 16 upward estimate revisions for fiscal 2011. The Zacks Consensus Estimate is now at $1.49, which is an 81% growth rate. Next year's forecasts are averaging $1.84, good enough for a 24% improvement.

Social Media is a Must

As a retailer, just because you have a Twitter feed or a Facebook page doesn't mean your company is going to do well. But if you want to do well, you better have some form of social media. Not only can you use the site to engage current customers, but also to cast that net a bit wider and bring in new ones.
 
CHIPOTLE MEXICN (CMG): Free Stock Analysis Report
 
DECKERS OUTDOOR (DECK): Free Stock Analysis Report
 
LULULEMON ATHLT (LULU): Free Stock Analysis Report
 
NETFLIX INC (NFLX): Free Stock Analysis Report
 
UNDER ARMOUR-A (UA): Free Stock Analysis Report
 
Zacks Investment Research