Facebook Inc. (FB, Financial) holds a leading position in the social networking industry due to its enormous monthly active user base. The social media giant ended 2016 in the green as the stock was up approximately 10%.
The stock is off to a great start this year as it is up over 15%. Currently, the stock trades at $133.85 per share, near its 52-week high.
Facebook recently reported amazing fourth-quarter 2016 results. For the quarter, the company reported earnings per share of $1.41, easily surpassing the analyst estimates by 10 cents. Revenue came in at $8.81 billion, beating the consensus by a wide margin of $300 million. Most significantly, that figure represents a whopping surge of nearly 51% year over year.
Facebook’s advertising business endures to outperform expectations as the revenue generated from the segment surged more than 53% to $8.6 billion. As a matter of fact, 98% of the company’s overall revenue is generated by its advertising business, which is driven by the amount of ads displayed to users and the average price per ad paid by advertisers.
For the full year, the company’s daily active users (DAUs) and monthly active users (MAUs) grew a respecitve 18% and 17% year over year. The company continues to benefit from the rise of smartphones as well. Its mobile DAUs and mobile MAUs escalated 23% and 21% year over year.Â
Moving ahead, it looks like the company’s ad load growth is slowing down. That is not a matter of concern, however, because advertising will have periodic dips and will not always continue to surge.
On the bright side, Facebook is a giant company and is well aware of the issues surrounding it. To overcome the slowing ad load, management is working to offset the loss.
For instance, user growth plays a very significant role in offsetting the decelerating ad load. The company’s monthly and daily active users continue to surge at a rapid pace without showing any signs of slowing down.
Summing up
Over the past several years, Facebook has been growing at a strong pace. It appears the company will continue to move upward in the year ahead through the growth of its user base. Despite the slowdown in advertising, Facebook will continue to generate large revenues as it extends its reach into several other markets.
As a result, shareholders should continue their long-term journey with Facebook in order to gain profits in the coming years.
Disclosure: No position in the stocks mentioned in this article.
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