Facebook Inc (NASDAQ:FB) piled on to its outstanding 2017 after Wednesday’s bell, putting out a Street-beating fourth-quarter earnings report that has FB stock primed to set new all-time highs.
Facebook stock was up 2% in Wednesday’s after-market trading, adding onto 16% year-to-date gains to make it one of the best-performing blue chips on the market. You can thank FB’s unrelenting operational growth, which took center stage Wednesday afternoon.
For its Q4, Facebook posted a sizzling 53% surge in revenues to $8.83 billion, and earnings that came to $1.41 per share. Wall Street was looking for sales of $8.52 billion and profits of $1.31 per share.
That marked the seventh straight beat for Facebook, which had plenty of highlights in its Q4 report:
- Daily active users (DAUs) jumped 18% to 1.23 billion.
- Mobile DAUs rose 23% to 1.15 billion.
- Mobile advertising revenue came to 84% of all advertising revenue, up from 80% in the same period a year ago.
- The cash balance is now at $29.45 billion.
Some investors were wary heading into Wednesday’s announcement following a Q3 report that also saw top- and bottom-line beats, but disappointed on the guidance front. That sent FB stock to one of its biggest dips since the company’s 2012 initial public offering.
Should the after-market gains hold, Facebook shares will be in brand-new territory.
FB shares currently sit above all their important moving averages, and the break above all-time highs would take out the last remaining bit of price resistance.
Also important to note is Facebook’s 2%-plus run in Wednesday’s regular trading hours, during which FB stock scrawled out a golden cross — a bullish technical indicator that occurs when the 50-day moving average crosses above the 200-day MA.
But as for the fundamentals, it is important to put the growth into perspective. Consider that Alphabet Inc (NASDAQ:GOOG, NASDAQ:GOOGL) is only growing its top line at about 20%-plus and Twitter Inc (NYSE:TWTR) is posting increases of only 8%. So FB is really in a league of its own, especially given its massive size.
Yet it certainly helps that the company continues to find new users. According to a tweet from Bloomberg’s Shira Ovide: “Facebook in a year added 269 million monthly active users. Nearly a whole Twitter’s worth of users in one year.”
Despite all this, there probably should still be caution with Facebook stock. Keep in mind that management has indicated that the torrid growth rates cannot continue. Although, it is far from certain to what degree. In the prior quarter, the CFO pointed out that there could be “meaningful” drop.
OK then, why might there be a slowdown? First of all, it will probably get tougher to find new users. For example, Facebook is banned in China. And rivals in the country, like Weibo Corp (ADR) (NASDAQ:WB) and Tencent Holdings Ltd (OTCMKTS:TCEHY), have been capitalizing on the opportunity.
Besides, the fourth-quarter growth was bolstered with holiday spending — which drives quite a bit of ad spending — as well as the presidential election, which relied heavily on social media. Oh, and then there was the controversy with “fake news.” FB has already implemented systems to reduce this, which could result in fewer clicks.
And finally, Wall Street’s reaction to the Q4 results has been fairly muted. Hey, shouldn’t there be more of a spike — given the huge growth numbers? Then again, investors have already been factoring in much of the good news — and then some. What’s more, with the upcoming Snapchat IPO, the offering may mean that investors will plow some of their winnings from Facebook stock into the new offering.
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.
