We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
It’s hard to beat Facebook at what it does well. i.e. capturing users’ imagination in an innovative way and making them see ads in the process. That’s what they proved from their stellar quarterly results and F8 developers’ conference. Here are some highlights-
F8 Developers Conference
Facebook had some BIG announcements at its F8 conference for developers, covering a wide range of topics including a dating service, new features for WhatsApp, Instagram and Messenger, Oculus Go and measures to protect people’s privacy.
The privacy factor has been the biggest concern for developers because they simply can’t have people leaving the platform. But while addressing that issue, Facebook made sure to get across its key message: that it’s a platform to connect people, that it isn’t easy to create, that it will likely make mistakes, that it will have to correct those mistakes and that most importantly, it will continue to build.
On that note, let’s jump to the hottest development: Facebook is getting into the dating business in a hopefully big way. There’s something weird about it though because your dating profile will only be shared with people that aren’t on your friends list to protect your privacy. Facebook could ultimately make that optional to give you more choice.
But it’s interesting that the announcement came at this time, almost as if to create a distraction from Facebook’s current privacy-related problems, people’s growing distrust in really big platforms and the CEO’s grilling in congress. Facebook will get even more personal data in this way, which isn’t cool. On the other hand, the company being the giant that it is, may still attract enough users to have a very successful business.
For instance, if 20% of its 2.2 billion monthly users opt into the service, that is 440 million people - compare that to the 7 million people using the very popular range of dating services that Match Group offers and you get a good idea of the potential. No wonder Match shares plunged on the news.
WhatsApp: Facebook said that 450 million people are now using Status, so it is dressing it up a bit with stickers and group video calling.
Instagram: The upgrade introduces video calling, bully comment weeding and Explore feature enhancing.
Messenger: Facebook is removing the clutter of the camera and games tabs and adding translation to facilitate doing business.
Moreover, it is facilitating the sharing of videos and photos from Spotify, SoundCloud, GoPro and other apps directly to Stories inside Facebook and Instagram that will make Facebook’s stories so much more interesting than what Snap (SNAP - Free Report) has on offer. No wonder Snap investors are freaking out.
Oculus Go: The standalone device with a 2-hour battery life is now on sale for $199 for the 32GB version and $249 for the 64GB version. Facebook gifted a 32GB device to all attendees in a publicity drive. So if you’re tired enough of connecting your phone to the VR headset you’re using currently that you’d rather Facebook controlled that experience for you, it’s a good buy.
Privacy: Other than repeating how it will dedicate 20K employees by year end, continue its app review process and give you more options when you’re likely reading something fake, Facebook explained how its new AI tools will do most of the weeding work in the future. Note that AI tools are built on your data and get better by eating more data. But hey, it’s all in the interest of your security and privacy.
Earnings
Revenue of $12.0 billion grew 49% over last year and topped the Zacks Consensus Estimate of $11.45 billion by 4.5%. Per share earnings of $1.69 grew 62.5%, beating our estimate of $1.36 by 24.3%. The results were a huge relief for investors because of uncertainties related to the Cambridge Analytica scandal and the fear that users could exit the platform en masse.
Overall, 1.45 billion users signed in daily while 2.2 billion signed in monthly. Daily active users (DAUs) and monthly active users (MAUs) were both up 13%. Average revenue per user (ARPU) was up 30.7%, so Facebook is doing an extremely good job of monetizing its user base. ARPU increased across geographies (U.S. and Canada up 38.2%, Europe 49.8%, Asia/Pacific 24.2% and Other 32.3%), with North America remaining the highest ARPU region by far.
Mobile represented 91% of advertising revenue and ad revenue was 98% of total revenue, so most of the business was generated on mobile devices.
On the expense front, cost of revenue jumped on account of video content acquisition and the increase will continue through the rest of the year. The change in the way Instant Articles revenue is recognized from a net to a gross basis, also contributed. Other expenses dropped as a percentage of sales.
Operating cash flow was up 55.4% from last year. Capex was up 121.2%.
Advertiser defections related to Cambridge Analytica and GDPR implementation are the two big concerns for investors at the moment. While management is taking measures to protect privacy of all parties, we won’t actually know if it materially impacts results until at least the next quarterly report.
Management expects that as a result of the GDPR rollout, European MAU and DAU will be flat to slightly down sequentially in the next quarter. They didn’t provide an estimate of the impact on advertising revenue although it isn’t currently expected to be material.
2018 opex guidance was narrowed and raised from 45-60% to 50-60%, attributable to significant investments in areas like safety and security (it is adding 20K employees to deal with recent concerns), content and R&D. Full-year capex is expected to be $15 billion (previous $14-15 billion), driven by investments in data centers, servers, network infrastructure and office facilities.
The WhatsApp Double-cross
WhatsApp co-founder Jan Koum is finally leaving the company and resigning from its board on disagreements with Facebook management about the deliberate weakening of its encryption system to access its users’ personal data, according to the Washington Post.
Jan Koum and Brian Acton sold their messaging service to Facebook in 2014 when the service had 500 million users. Today the number of users has more than doubled, and Facebook is looking to monetize the platform.
The business was sold on the condition that it wouldn’t be used as a platform to sell ads, but Facebook did away with the 99 cent annual charge soon after the acquisition and sometime later, started sharing users’ contact information and analytics with the Facebook platform, breaking another condition of sale. On Koum’s initiative and insistence, it did however implement a network wide encryption that it’s now apparently thinking of breaking down.
After all, Facebook paid $19 billion for the company, so obviously, a 99 cent annual fee won’t cut it.
In any case, Acton left in November and publicly criticized Facebook for the double-cross and now, Koum is leaving on a quieter note to collect “rare air-cooled Porsches, working on my cars and playing ultimate frisbee.”
Koum and Acton were critical of the targeted advertising model. In a WhatsApp blog post in 2012, they wrote that “no one wakes up excited to see more advertising; no one goes to sleep thinking about the ads they’ll see tomorrow.” They described online advertising as “a disruption to aesthetics, an insult to your intelligence, and the interruption of your train of thought.” I couldn’t agree more. Especially since a lot of advertising is dishonest and nothing in the world is free.
Zacks names 5 companies poised to ride a medical breakthrough that is targeting cures for leukemia, AIDS, muscular dystrophy, hemophilia, and other conditions.
New products in this field are already generating substantial revenue and even more wondrous treatments are in the pipeline. Early investors could realize exceptional profits.
Image: Bigstock
Facebook Roundup: F8, Earnings, WhatsApp Co-Founder Leaves
It’s hard to beat Facebook at what it does well. i.e. capturing users’ imagination in an innovative way and making them see ads in the process. That’s what they proved from their stellar quarterly results and F8 developers’ conference. Here are some highlights-
F8 Developers Conference
Facebook had some BIG announcements at its F8 conference for developers, covering a wide range of topics including a dating service, new features for WhatsApp, Instagram and Messenger, Oculus Go and measures to protect people’s privacy.
The privacy factor has been the biggest concern for developers because they simply can’t have people leaving the platform. But while addressing that issue, Facebook made sure to get across its key message: that it’s a platform to connect people, that it isn’t easy to create, that it will likely make mistakes, that it will have to correct those mistakes and that most importantly, it will continue to build.
On that note, let’s jump to the hottest development: Facebook is getting into the dating business in a hopefully big way. There’s something weird about it though because your dating profile will only be shared with people that aren’t on your friends list to protect your privacy. Facebook could ultimately make that optional to give you more choice.
But it’s interesting that the announcement came at this time, almost as if to create a distraction from Facebook’s current privacy-related problems, people’s growing distrust in really big platforms and the CEO’s grilling in congress. Facebook will get even more personal data in this way, which isn’t cool. On the other hand, the company being the giant that it is, may still attract enough users to have a very successful business.
For instance, if 20% of its 2.2 billion monthly users opt into the service, that is 440 million people - compare that to the 7 million people using the very popular range of dating services that Match Group offers and you get a good idea of the potential. No wonder Match shares plunged on the news.
WhatsApp: Facebook said that 450 million people are now using Status, so it is dressing it up a bit with stickers and group video calling.
Instagram: The upgrade introduces video calling, bully comment weeding and Explore feature enhancing.
Messenger: Facebook is removing the clutter of the camera and games tabs and adding translation to facilitate doing business.
Moreover, it is facilitating the sharing of videos and photos from Spotify, SoundCloud, GoPro and other apps directly to Stories inside Facebook and Instagram that will make Facebook’s stories so much more interesting than what Snap (SNAP - Free Report) has on offer. No wonder Snap investors are freaking out.
Oculus Go: The standalone device with a 2-hour battery life is now on sale for $199 for the 32GB version and $249 for the 64GB version. Facebook gifted a 32GB device to all attendees in a publicity drive. So if you’re tired enough of connecting your phone to the VR headset you’re using currently that you’d rather Facebook controlled that experience for you, it’s a good buy.
Privacy: Other than repeating how it will dedicate 20K employees by year end, continue its app review process and give you more options when you’re likely reading something fake, Facebook explained how its new AI tools will do most of the weeding work in the future. Note that AI tools are built on your data and get better by eating more data. But hey, it’s all in the interest of your security and privacy.
Earnings
Revenue of $12.0 billion grew 49% over last year and topped the Zacks Consensus Estimate of $11.45 billion by 4.5%. Per share earnings of $1.69 grew 62.5%, beating our estimate of $1.36 by 24.3%. The results were a huge relief for investors because of uncertainties related to the Cambridge Analytica scandal and the fear that users could exit the platform en masse.
Overall, 1.45 billion users signed in daily while 2.2 billion signed in monthly. Daily active users (DAUs) and monthly active users (MAUs) were both up 13%. Average revenue per user (ARPU) was up 30.7%, so Facebook is doing an extremely good job of monetizing its user base. ARPU increased across geographies (U.S. and Canada up 38.2%, Europe 49.8%, Asia/Pacific 24.2% and Other 32.3%), with North America remaining the highest ARPU region by far.
Mobile represented 91% of advertising revenue and ad revenue was 98% of total revenue, so most of the business was generated on mobile devices.
On the expense front, cost of revenue jumped on account of video content acquisition and the increase will continue through the rest of the year. The change in the way Instant Articles revenue is recognized from a net to a gross basis, also contributed. Other expenses dropped as a percentage of sales.
Operating cash flow was up 55.4% from last year. Capex was up 121.2%.
Advertiser defections related to Cambridge Analytica and GDPR implementation are the two big concerns for investors at the moment. While management is taking measures to protect privacy of all parties, we won’t actually know if it materially impacts results until at least the next quarterly report.
Management expects that as a result of the GDPR rollout, European MAU and DAU will be flat to slightly down sequentially in the next quarter. They didn’t provide an estimate of the impact on advertising revenue although it isn’t currently expected to be material.
2018 opex guidance was narrowed and raised from 45-60% to 50-60%, attributable to significant investments in areas like safety and security (it is adding 20K employees to deal with recent concerns), content and R&D. Full-year capex is expected to be $15 billion (previous $14-15 billion), driven by investments in data centers, servers, network infrastructure and office facilities.
The WhatsApp Double-cross
WhatsApp co-founder Jan Koum is finally leaving the company and resigning from its board on disagreements with Facebook management about the deliberate weakening of its encryption system to access its users’ personal data, according to the Washington Post.
Jan Koum and Brian Acton sold their messaging service to Facebook in 2014 when the service had 500 million users. Today the number of users has more than doubled, and Facebook is looking to monetize the platform.
The business was sold on the condition that it wouldn’t be used as a platform to sell ads, but Facebook did away with the 99 cent annual charge soon after the acquisition and sometime later, started sharing users’ contact information and analytics with the Facebook platform, breaking another condition of sale. On Koum’s initiative and insistence, it did however implement a network wide encryption that it’s now apparently thinking of breaking down.
After all, Facebook paid $19 billion for the company, so obviously, a 99 cent annual fee won’t cut it.
In any case, Acton left in November and publicly criticized Facebook for the double-cross and now, Koum is leaving on a quieter note to collect “rare air-cooled Porsches, working on my cars and playing ultimate frisbee.”
Koum and Acton were critical of the targeted advertising model. In a WhatsApp blog post in 2012, they wrote that “no one wakes up excited to see more advertising; no one goes to sleep thinking about the ads they’ll see tomorrow.” They described online advertising as “a disruption to aesthetics, an insult to your intelligence, and the interruption of your train of thought.” I couldn’t agree more. Especially since a lot of advertising is dishonest and nothing in the world is free.
Recommendations
Facebook has a Zacks Rank #3 (Hold), so buy-ranked Autohome (ATHM - Free Report) , Baidu (BIDU - Free Report) , Etsy (ETSY - Free Report) and Shopify (SHOP - Free Report) are safer bets at the moment. Or you can also see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
5 Medical Stocks to Buy Now
Zacks names 5 companies poised to ride a medical breakthrough that is targeting cures for leukemia, AIDS, muscular dystrophy, hemophilia, and other conditions.
New products in this field are already generating substantial revenue and even more wondrous treatments are in the pipeline. Early investors could realize exceptional profits.
Click here to see the 5 stocks >>