Facebook 3Q Earnings Up But Investors Worried
By Aleksandra Neizvestnaya
Facebook, Inc. (FB) shares spiked after earnings came out Wednesday, October 30th, but plunged after company executives released their outlooks for the future.
Revenue pulled in at $2.02 billion, exceeding analyst expectation of $1.87 billion for the quarter ending September 30th. This is a 60% increase from its 2012 third quarter results of $1.26 billion. Net income came to be $425 million, compared to a loss of $59 million the year before.
“Growth continues to be driven by mobile,” said Facebook’s CFO David Ebersman in a press release. Year-over-year total ad revenue grew 66% to $1.8 billion. Mobile ad revenue grew to 49% of the total ad revenue, compared to 41% last quarter. “This is a remarkable milestone in the short time since we introduced mobile News Feed ads just last year.” Ad revenue makes up 89% of the company’s total revenue.
Sheryl Sandberg, Facebook’s COO, commented that in 2013 “for the very first time, people will spend more time with digital media than watching TV.” According to Sandberg, Facebook is in a good position to benefit from this shift. In the United States, Facebook, including Instagram, gets one in five minutes of the time people spend on mobile, and one in eight minutes on desktop.
Daily active users worldwide climbed to 728 million, up 25% from the same period a year ago. Daily users represented 61% of the 1.19 billion people who accessed Facebook during the month of September.
What frightened investors was the CFO’s remark regarding the decline in daily users among younger teens. Furthermore, the company does not expect to significantly increase ads in users’ feeds, which was a meaningful driver of revenue growth in 2013. Instead, the social media will continue working on improving the quality and relevance of ads.
The company’s stock rose as much as 17% to $57.98 in after-hours trading after the quarterly results were released but the company’s earnings call led to an about-face. On midday Thursday, the price flattened out at about $50.21.
Facebook stock has been up roughly 79% so far this year and more than 100% over the last 12 months. It has outperformed the S&P 500 Index (SPX) by nearly 23% during the past three months. After having a rocky start since going public in 2012, it took the stock price of the biggest social networking website over a year to get back to its IPO price. The end of July of this year marked the 14 months that it took.
Looking at Facebook’s competition, Google (GOOG) reported $14.9 billion in revenue, and $2.97 billion in net income in the third quarter. LinkedIn (LNKD) announced a revenue of $393 million and a net loss of $3.4 million. Also, Twitter (TWTR), after going public on Thursday, November 7th, is estimated to have a revenue of $215.8 million in the current quarter. Currently, Facebook stands in fifth place among the top companies in the Internet Information Providers industry.
According to 33 of Wall Street’s analysts, Facebook is estimated to have a revenue of $2.15 billion in the next quarter, and to end with a year revenue of $7.28 billion. Stock is expected to grow 29.4% by the end of the year.
“Looking ahead, you can expect us to keep preparing for the future,” said Mark Zuckerberg, the company’s CEO, “even as we keep on building momentum today.” The company’s executives have their focus on, “continuing to capitalize on the shift to mobile, increasing the number of marketers who advertise with us and continuing to invest in our ad products.”
Sources:
(Form 10Q) http://investor.fb.com/sec.cfm
(Earnings Press Release; Conference Call; Earnings Slides) http://investor.fb.co/results.cfm
(Earnings Estimates) http://finance.yahoo.com/q/ae?s=FB
(Industry Rank) http://finance.yahoo.com/q/in?s=FB+Industry