Facebook (FB, Financial) reported solid results for the third quarter with significant growth in both revenue and profit on a year-over-year basis. The numbers topped the street expectations and Facebook continues to add monthly active users to both its mobile and PC segment. Led by its strong performance, the stock soared considerably and is currently trading near its 52-week high. The company has immense opportunities in the days ahead, but the management also cites various challenges, which cannot be overlooked. Let’s see in detail what can we expect from this company in the coming months.
Making progress in key areas
During the quarter, its monthly active users grew 40% compared to last year, and the company is now proceeding even more aggressively to achieve its long-term goals. In this direction, it will work to accomplish its main goal of growing its existing communities and businesses, allowing them to reach their full potential. And the results were encouraging so far with around 700 million people using Facebook groups every month.
Talking about Instagram, Facebook made significant progress during the quarter. Hyperlapse launched in August for iOS and its investments to increase the speed and performance of Instagram on Android is driving its growth worldwide. In fact, in some countries it managed to achieve 100% growth year over year. The management says that, globally, people spend around 21 minutes a day on average using the Instagram app. These numbers reflect that the company is right on track and could create a lot of value for marketers in the days ahead.
The acquisition of Instagram was a good bet for the company, and now it has made a similar bet on WhatsApp. Facebook has completed the acquisition of WhatsApp for a whopping $19 billion, and the company expects this new addition to play a strategic role to boost its growth. WhatsApp is a messaging service company that charges a subscription fee of $1 a year, bringing around $20 million in annual revenue. It seems quite difficult to justify a $19 billion deal with a meager amount such as this, but Facebook probably has bigger plans to reap money from its messaging services.
Oculus and more
The company is also moving steadily with Oculus (OCLS, Financial), which according to the management is a long-term bet on the future of computing. In its first Oculus developer conference, Facebook announced the launch of a new prototype VR headset, which would be a consumer version of Rift.
In addition, the company is using various strategies to expand its business on an International platform. In July Facebook partnered with Airtel to launch the Internet.org app in Zambia. And the results are surprising, as in several countries key distributors, people and communities are coming online for the first time. This will bring the company one step closer to achieving its goal of connecting everyone in the world.
Conclusion
Facebook reported strong numbers for the quarter and looks to be on the right track for continued growth. However, analysts are concerned over the increased spending outlook given by Zuckerberg, coupled with sales numbers that fell short of the consensus. But the company has strong fundamentals and these investments could yield good return in the coming years. Moreover, since the company launched its IPO the stock has performed stupendously and considering its future prospects we could see more upside to this stock.
