Facebook Inc Earnings: Excellent … But Not REALLY Excellent

A solid Q3 report mostly met expectations ... and that's about it

530 Fatties
Source: ©iStock.com/hocus-focus

When it comes to mobile, Facebook Inc (FB) has made huge strides to become the king of this fast-growing market. It’s almost hard to believe that just a few years ago, things looked pretty bleak — especially considering some of the eye-popping numbers in the third-quarter Facebook earnings report.

And yet … it wasn’t enough to get Wall Street off its feet. In fact, it wasn’t even enough to keep the bears at bay.

FB stock has fallen from all-time highs set this week, down some 5% in Tuesday’s aftermarket trading after Facebook earnings were able to just barely compete with analyst expectations.

Facebook earnings for Q3 came to $806 million (30 cents per share) — some 90% higher than the year-ago period’s $425 million (17 cents per share). However, once you backed out one-time charges, earnings came to 43 cents per share — just 3 cents above Wall Street’s consensus estimate.

Revenues were even closer to the line, spiking 59% to $3.2 billion, merely matching expectations.

The Facebook earnings report did show that FB has no problem finding new users. Monthly active users (MAUs) jumped 14% to 1.35 billion — an impressive jump given Facebook’s scale. It also makes Twitter (TWTR) look lame in comparison a day after its numbers came out and showed meager growth in MAUs.

And even, then MAUs were just in line with Wall Street’s forecasts. So were mobile ad sales, which accounted for 66% of total ad sales.

The takeaway: There were no blowouts to be found in the Facebook earnings report. Wall Street analysts were pretty much spot-on, and in the crooked world of easy-to-climb expectations, that’s a worry point.

Going forward, FB still has some tailwinds thanks to the many levers it can pull to generate revenues. Instagram and WhatsApp have lots of potential — the latter generated a mere $10 million in revenue last year despite boasting more than 600 million MAUs. And Facebook recently introduced its mobile ad network, as well as a system to monetize online videos.

But it’ll be several quarters, even years, before these will really funnel into the performance of FB stock.

Meanwhile, that potential is pretty much baked into Facebook shares, which trade at 85 times earnings — consistent with a hyper-growth play.

Bottom line: Unless Mark Zuckerberg gets even more aggressive in coming months, FB stock could be stuck in a rut.

Tom Taulli runs the InvestorPlace blog IPO Playbook. He is also the author of High-Profit IPO StrategiesAll 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.

More From InvestorPlace


Article printed from InvestorPlace Media, https://investorplace.com/2014/10/facebook-earnings-fb/.

©2020 InvestorPlace Media, LLC