Shares of Facebook are down nearly 5.7% on Thursday after the release of the company’s latest earnings report Wednesday afternoon. Despite posting quarterly earnings and revenue beats, Facebook is slumping after it warned investors about the potential for ad revenues to start slowing down soon.
For the third quarter of fiscal 2016, Facebook posted earnings of 88 cents per share on revenues of $7.011 billion. These figures beat the Zacks Consensus Estimates of $0.77 per share and $6.923 billion, respectively (also read: Facebook Posts Q3 Earnings Beat, Mobiles MAUs Up 22%).
Nevertheless, Facebook fell in after-hours trading because the company noted that, although ad revenues will continue to grow, they will face tougher year-over-year comparisons in the coming quarters. Facebook also noted that ad load, which has been a leading factor driving ad revenues, won’t be a big factor after mid-2017. The company said ad revenue rates will “come down meaningfully” as a result.
Facebook also has bold plans to become much more than a social media company, and its report detailed plans to increase investments significantly in 2017. The company plans to go on a hiring spree in the spring, and it also wants to start building more data centers, which could cut into near-term earnings.
Fundamentally, Facebook remains relatively sound. However, the company sees somewhat of a plateau in the near future, and that’s enough to have investors worrying a bit. Not even Zuckerberg and friends can continue to grow at shocking rates forever.
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Here's Why Facebook (FB) Stock Is Down Today
Shares of Facebook are down nearly 5.7% on Thursday after the release of the company’s latest earnings report Wednesday afternoon. Despite posting quarterly earnings and revenue beats, Facebook is slumping after it warned investors about the potential for ad revenues to start slowing down soon.
For the third quarter of fiscal 2016, Facebook posted earnings of 88 cents per share on revenues of $7.011 billion. These figures beat the Zacks Consensus Estimates of $0.77 per share and $6.923 billion, respectively (also read: Facebook Posts Q3 Earnings Beat, Mobiles MAUs Up 22%).
Nevertheless, Facebook fell in after-hours trading because the company noted that, although ad revenues will continue to grow, they will face tougher year-over-year comparisons in the coming quarters. Facebook also noted that ad load, which has been a leading factor driving ad revenues, won’t be a big factor after mid-2017. The company said ad revenue rates will “come down meaningfully” as a result.
Facebook also has bold plans to become much more than a social media company, and its report detailed plans to increase investments significantly in 2017. The company plans to go on a hiring spree in the spring, and it also wants to start building more data centers, which could cut into near-term earnings.
Fundamentally, Facebook remains relatively sound. However, the company sees somewhat of a plateau in the near future, and that’s enough to have investors worrying a bit. Not even Zuckerberg and friends can continue to grow at shocking rates forever.
Stocks that Aren't in the News. Yet.
You are invited to download the full, up-to-the-minute list of 220 Zacks Rank #1 "Strong Buys" free of charge. Many of these companies are almost unheard of by the general public and just starting to get noticed by Wall Street. They have been pinpointed by the Zacks system that nearly tripled the market from 1988 through 2015 with a stellar average gain of +26% per year. See these high-potential stocks free >>