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Facebook (FB) Beats on Earnings & Revenues Yet Again in Q1
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Facebook, Inc. reported yet another better-than-expected quarterly performance, marking the seventh successive quarter of earnings and revenues beat.
The company’s first-quarter 2017 earnings of $1.04 per share and revenues of $8.032 billion handily beat the Zacks Consensus Estimate of 88 cents and $7.849 billion respectively. Facebook’s Mobileand live video efforts continue to pay off big time for the social media giant. Instagram is also emerging as a major cash cow with over 500,000 advertisers. CEO Mark Zuckerberg said that in order to curb the menace of posting of violent videos on Facebook Live, the company is now appointing more 3K people to its Community Operations Team to better handle the review process.
As expected, Facebook maintains a cautious stance on revenue and ad growth, once again stating that ad revenues will continue to grow, but are likely to face tougher year-over-year comparisons in the current year. Moreover, as the company continues to ramp up investments, costs will escalate. Facebook plans to go on a hiring spree this year and especially recruit engineers, which will further add to its costs. Therefore, it’s a no brainer that Facebook (or even any other company for that matter) will keep up with those dizzying initial growth rates as it gets bigger. Nonetheless, shares were down 2.5% in the after-market trading.
Quarterly Numbers in Details
Revenues, excluding the impact of year-over-year changes in foreign exchange rates basis, surged 50% from the prior-year quarter.
Facebook’s consistently expanding user base remains one of its biggest growth catalysts. Its monthly active users (MAUs) were up 17% year over year to a staggering 1.94 billion. Daily Active Users (DAUs) were 1.28 billion, reflecting an 18% increase year over year.
Advertising revenues were $7.857 billion, jumping 51% year over year, driven by increasing mobile engagement, higher number of marketers and consistent investment in new products.
Mobile ad revenues in the quarter were $6.7 billion (up 58% year over year), contributing 85% to total ad revenues. Ad impressions grew 32%, driven by surging mobile ad impressions. Average price per ad increased 14% from the year-ago quarter. Average revenue per user was $4.00.
Payments and other fees decreased 3% year over year to $175 million in the reported quarter, owing to a reduction in payment revenues related to PC games. Management expects revenues from this segment to face further decline as PCs lose market share.
Cost and expenses elevated 40% to $4.7 billion, due to increase in workforce and marketing expenses. However, robust revenue growth provided enough cushion to operating margins. Operating income of $3.3 billion grew 66% year over year.
Balance Sheet & Cash Flow
Facebook exited the quarter with cash and cash equivalents, and marketable securities of $32.3 billion.
The company generated nearly $5.1 billion of cash flow from operating activities in the first quarter of 2017 compared with $3.5 billion in the year-ago period. Free cash flow was $3.8 billion compared with $2.3 billion in the year-ago quarter. The company incurred capital expenditure of $1.3 billion in the reported quarter.
Facebook repurchased $228 million worth of shares.
Outlook
GAAP expenses are projected to increase in a band of 40–50%, while capex is expected to be $7–$7.5 billion. The company expects 2017 to be a year of aggressive investments. Facebook plans to build more data centers as well as recruit more engineers to fuel its artificial intelligence (AI) and augmented reality/virtual reality (AR/VR) technology ambitions.
Final Word
We remain positive on Facebook as it works on becoming a tech powerhouse. Zuckerberg aspires to make the company much more than just a social media platform. In the past few months, Facebook clearly highlighted its ambitions of becoming a tech powerhouse. At its latest F8, Facebook announced that it continues to work on developing cutting edge AI and AR/VR technology. It also unveiled its virtual social network called Facebook Spaces.
Also, ever since its availability to worldwide advertisers last year, Instagram’s ad platform emerged as an important cash cow for Facebook. With over 600 million users, Instagram is now set to join the company’s other billion-plus platforms — Facebook, Messenger and WhatsApp.The company is also aggressively working on monetizing its subsidiaries, Messenger, Oculus and WhatsApp. Chatbots and “conversational commerce” are likely to be the strategies for Messenger and WhatsApp.
Facebook’s huge user base of over 1.9 billion enables it to fend off competition. However, with the user base already at sky-high levels, a relative slowdown is imminent. Furthermore, the company is approaching full penetration in the North American and European markets. Nevertheless, growth in Asia and rest of the world should help cushion user growth in the foreseeable future.
Facebook is currently facing a number of challenges. It needs to tread cautiously so as not to irritate users with too many ads. Competition from the likes of Snapchat (SNAP - Free Report) , Twitter and Google for ad dollars is also concerning. As expected, the company maintains a cautious stance on future growth prospects.
At present, Facebook carries a Zacks Rank #3 (Hold). Given the phenomenal increase in mobile ad business and video efforts, the stock has vastly outperformed the broader market. In the past one year, Facebook’s shares have generated a return of 25.75%, compared with the Zacks Internet Services industry’s gain of 21.75%.
Alphabet has an average positive earnings surprise of 5.74%.
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With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.
Image: Bigstock
Facebook (FB) Beats on Earnings & Revenues Yet Again in Q1
Facebook, Inc. reported yet another better-than-expected quarterly performance, marking the seventh successive quarter of earnings and revenues beat.
The company’s first-quarter 2017 earnings of $1.04 per share and revenues of $8.032 billion handily beat the Zacks Consensus Estimate of 88 cents and $7.849 billion respectively. Facebook’s Mobileand live video efforts continue to pay off big time for the social media giant. Instagram is also emerging as a major cash cow with over 500,000 advertisers. CEO Mark Zuckerberg said that in order to curb the menace of posting of violent videos on Facebook Live, the company is now appointing more 3K people to its Community Operations Team to better handle the review process.
As expected, Facebook maintains a cautious stance on revenue and ad growth, once again stating that ad revenues will continue to grow, but are likely to face tougher year-over-year comparisons in the current year. Moreover, as the company continues to ramp up investments, costs will escalate. Facebook plans to go on a hiring spree this year and especially recruit engineers, which will further add to its costs. Therefore, it’s a no brainer that Facebook (or even any other company for that matter) will keep up with those dizzying initial growth rates as it gets bigger. Nonetheless, shares were down 2.5% in the after-market trading.
Quarterly Numbers in Details
Revenues, excluding the impact of year-over-year changes in foreign exchange rates basis, surged 50% from the prior-year quarter.
Facebook’s consistently expanding user base remains one of its biggest growth catalysts. Its monthly active users (MAUs) were up 17% year over year to a staggering 1.94 billion. Daily Active Users (DAUs) were 1.28 billion, reflecting an 18% increase year over year.
Advertising revenues were $7.857 billion, jumping 51% year over year, driven by increasing mobile engagement, higher number of marketers and consistent investment in new products.
Facebook, Inc. Price, Consensus and EPS Surprise
Facebook, Inc. Price, Consensus and EPS Surprise | Facebook, Inc. Quote
Mobile ad revenues in the quarter were $6.7 billion (up 58% year over year), contributing 85% to total ad revenues. Ad impressions grew 32%, driven by surging mobile ad impressions. Average price per ad increased 14% from the year-ago quarter. Average revenue per user was $4.00.
Payments and other fees decreased 3% year over year to $175 million in the reported quarter, owing to a reduction in payment revenues related to PC games. Management expects revenues from this segment to face further decline as PCs lose market share.
Cost and expenses elevated 40% to $4.7 billion, due to increase in workforce and marketing expenses. However, robust revenue growth provided enough cushion to operating margins. Operating income of $3.3 billion grew 66% year over year.
Balance Sheet & Cash Flow
Facebook exited the quarter with cash and cash equivalents, and marketable securities of $32.3 billion.
The company generated nearly $5.1 billion of cash flow from operating activities in the first quarter of 2017 compared with $3.5 billion in the year-ago period. Free cash flow was $3.8 billion compared with $2.3 billion in the year-ago quarter. The company incurred capital expenditure of $1.3 billion in the reported quarter.
Facebook repurchased $228 million worth of shares.
Outlook
GAAP expenses are projected to increase in a band of 40–50%, while capex is expected to be $7–$7.5 billion. The company expects 2017 to be a year of aggressive investments. Facebook plans to build more data centers as well as recruit more engineers to fuel its artificial intelligence (AI) and augmented reality/virtual reality (AR/VR) technology ambitions.
Final Word
We remain positive on Facebook as it works on becoming a tech powerhouse. Zuckerberg aspires to make the company much more than just a social media platform. In the past few months, Facebook clearly highlighted its ambitions of becoming a tech powerhouse. At its latest F8, Facebook announced that it continues to work on developing cutting edge AI and AR/VR technology. It also unveiled its virtual social network called Facebook Spaces.
Also, ever since its availability to worldwide advertisers last year, Instagram’s ad platform emerged as an important cash cow for Facebook. With over 600 million users, Instagram is now set to join the company’s other billion-plus platforms — Facebook, Messenger and WhatsApp.The company is also aggressively working on monetizing its subsidiaries, Messenger, Oculus and WhatsApp. Chatbots and “conversational commerce” are likely to be the strategies for Messenger and WhatsApp.
Facebook’s huge user base of over 1.9 billion enables it to fend off competition. However, with the user base already at sky-high levels, a relative slowdown is imminent. Furthermore, the company is approaching full penetration in the North American and European markets. Nevertheless, growth in Asia and rest of the world should help cushion user growth in the foreseeable future.
Facebook is currently facing a number of challenges. It needs to tread cautiously so as not to irritate users with too many ads. Competition from the likes of Snapchat (SNAP - Free Report) , Twitter and Google for ad dollars is also concerning. As expected, the company maintains a cautious stance on future growth prospects.
At present, Facebook carries a Zacks Rank #3 (Hold). Given the phenomenal increase in mobile ad business and video efforts, the stock has vastly outperformed the broader market. In the past one year, Facebook’s shares have generated a return of 25.75%, compared with the Zacks Internet Services industry’s gain of 21.75%.
Stock to Consider
A stock worth consideration in the tech space is Alphabet Inc (GOOGL - Free Report) that sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Alphabet has an average positive earnings surprise of 5.74%.
Will You Make a Fortune on the Shift to Electric Cars?
Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.
With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.
It's not the one you think.
See This Ticker Free >>