Remember when Facebook (FB) had a problem with mobile? Those days are long gone.
Facebook stock appeared set to extend its nearly 140% 52-week gains this morning after a strong earnings report in which FB reported that its mobile monthly active user count has topped the 1 billion mark. That represents huge year-over-year growth, too, as mobile MAUs were just 751 million in the year-ago period.
That’s a staggering number that blows away all other mobile players.
And yet … Wall Street’s response once the bell run was more muted. FB stock opened slightly down on Thursday, leaving Facebook stock more than 13% off its early March highs.
Facebook’s financials were impressive as revenues spiked by 72% to $2.5 billion, which beat the Street forecast of $2.36 billion — and that’s amid a period that’s generally soft for ad sales. And the mobile business continued to grab an outsized share of ad budgets, with mobile accounting for a sizzling 59% of overall ad revenues.
Moreover, Facebook was able to drive strong profits, too. Net income hit $642 million, or 25 cents per share of Facebook stock, up from $219 million, or 9 cents per share, in the year-ago period. Adjusted earnings of 34 cents also beat the Street.
So … why the lackluster response in Facebook stock?
First off, there might be some timidness over the departure of Chief Financial Officer David Ebersman (he announced he’ll be out June 1) to return to the healthcare industry.
It could mean Ebersman just enjoys the healthcare industry more. But it leaves the door open for a few questions: Does he instead think that the growth in social media doesn’t look as promising anymore?
Or is he concerned about Facebook’s own strategy?
Let’s face it: Mark Zuckerberg has been extremely aggressive with acquisitions, a la the $19 billion deal for WhatsApp, the $2 billion purchase of Oculus VR and last year’s billion-dollar buyout of Instagram. But few mega-tech companies have been able to really wring out value in large swaths of high-priced M&A. This was the case — more than a decade ago — with other companies like AOL (AOL) and Yahoo! (YHOO), which pulled off ill-conceived deals to keep up the growth.
Lastly, Facebook’s eye-popping user numbers might actually be a double-edged sword of sorts.
While 1 billion mobile MAUs is attractive on the monetization end, the larger Facebook grows its user base, the harder time it will have attracting new ones. The company is essentially blocked out of China. And as for other growth areas, they are generally in developing countries that do not have advanced infrastructure.
Bottom line: Facebook continuously looks to be closing in on a peak, which makes its user numbers continuously one of the most important metrics to look for in its quarterly reports. Keep your eyes fixed on this, because when users peak … well, so might Facebook stock.
Tom Taulli runs the InvestorPlace blog IPO Playbook. He is also the author of High-Profit IPO Strategies, All About Commodities and All About Short Selling. Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.