Although social media giant Facebook Inc. (FB, Financial) said second-quarter revenues increased 42% year over year, revenues of $13.231 billion still missed analyst expectations by approximately $200 million.
The Menlo Park, California-based company reported net income of $4.988 billion, or earnings of $1.69 per share, compared to net income of $3.064 billion, or earnings of $1.04 per share, in the prior-year quarter.
Company revenue growth expected to decelerate for the balance of the year
CEO Mark Zuckerberg said on the earnings call that over 2.5 billion people use one of Facebook’s apps, including Instagram, WhatsApp and Messenger. Despite this, monthly average users of 2.23 billion missed analyst expectations of 2.24 billion while daily average users were off approximately 0.03 billion. The decline in European users as a result of General Data Production Regulations (GDPR) contributed to the lower number of overall users.
Zuckerberg and Chief Operating Officer Sheryl Sandberg mentioned that Facebook is “committed to investing to keep people safe and secure” and continue building ways for people to connect. The CEO mentioned several initiatives to ensure security, including the removal of fake accounts through artificial intelligence and requiring that advertisers verify their identity when creating Facebook ads.
GuruFocus ranks Facebook’s profitability 8 out of 10 as the company’s profit margins and returns are outperforming over 95% of global competitors. Despite this, management lowered revenue expectations for the remainder of the year on headwinds stemming from currency fluctuations and the investments in data privacy and security.
Stock price tumbles over 20% in post-market trading
Facebook traded nearly 23% lower in post-market trading on the lowered revenue guidance. Despite this, GuruFocus still warns that Facebook’s share price is near a 10-year high and close to its median price-sales valuation.
Gurus with top positions in Facebook include Frank Sands (Trades, Portfolio), Andreas Halvorsen (Trades, Portfolio), Steve Mandel (Trades, Portfolio), David Tepper (Trades, Portfolio), Daniel Loeb (Trades, Portfolio) and Chase Coleman (Trades, Portfolio)’s Tiger Global Management. During the second quarter, Spiros Segalas (Trades, Portfolio) and Ken Fisher (Trades, Portfolio) invested in 234,416 and 18,392 shares for an average price of $180.53 per share.
Disclosure: No positions.
