Facebook Inc. (FB, Financial) opened market trading on Halloween over 6% higher despite the company reporting revenue and daily active user counts that missed consensus estimates on Tuesday.
The Menlo Park, California-based social media giant reported revenues of $13.73 billion on 1.49 billion daily active users, down from the consensus estimates of $13.78 billion on 1.51 billion daily active users. Despite this, earnings per share of $1.76 outperformed the consensus estimate by 29 cents.
Company raises cost outlook on initiatives to promote private messaging and video
Zuckerberg said on the earnings call that over 2.6 billion people use at least one product of Facebook’s family of products, which include Facebook, Messenger, Instagram and WhatsApp. The CEO listed several strategic initiatives to promote the platform’s security and users’ privacy: private messaging, stories and video.
Zuckerberg reiterated several times during the call that stories are “the future of social media:” while users share billions of moments and messages per day, with growth in all global regions, people are now switching to modes that keep content available to the public for shorter time frames. In light of the changing trend, Facebook accelerated advertising initiatives according to Chief Operating Officer Sheryl Sandberg.
Sandberg said mobile ad revenues represented 92% of total company revenues, led by strong growth in feed advertising. Ad revenues increased in nearly each geographic segment: the U.S., Europe and Asia-Pacific. The strong ad revenue growth contributed to a three-year revenue growth rate of 43.20%, a rate that outperforms over 89% of global competitors. GuruFocus ranks Facebook’s financial strength and profitability 9 out of 10 on several positive investing signs, which include robust interest coverage, expanding profit margins and a strong Piotroski F-score of 7.
Despite the company’s strategic initiatives for the upcoming years, Chief Financial Officer David Wehner warned total expenses for 2019 can grow between 40% and 50% from those of 2018 as the company continues investing in cyber security and improving products like Facebook Watch, IGTV and Marketplace.
Stock rises on a strong day for U.S. markets
Facebook opened over 6% higher at market open on Wednesday even though Wehner said the same headwinds leading to lowered revenue guidance for the rest of 2018 are expected to continue. The company also said it still sees growth potential in Instagram in the long term.
The Dow Jones industrial average opened 300 points higher, led by Visa Inc. (V, Financial). Facebook’s gain propelled other technology companies higher: Jeff Bezos’ Amazon.com Inc. (AMZN, Financial) rose 2.62%, Warren Buffett (Trades, Portfolio)’s largest holding Apple Inc. (AAPL, Financial) climbed 1.82%, Google parent Alphabet Inc. (GOOGL, Financial) rose 2.55%, and streaming giant Netflix Inc. (NFLX, Financial) soared 5.16%.
Facebook gave a sweet early treat for gurus on Halloween: Gurus with holdings in Facebook include Spiros Segalas (Trades, Portfolio), Steven Romick (Trades, Portfolio) and Stanley Druckenmiller (Trades, Portfolio).
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