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The report on Facebook's results and call (FB) present quite interesting mix of positives and negatives.
Shares of the social media giant fell 17% over last year, due to major concerns about revenue growth and usage trends, the markets are deciding for the when the good news outweighs the bad ones.
After the Tuesday bell, Facebook announced a turnover of 13.73 billion USD for the third quarter (up 33% annually) and a GAAP EPS of 1.76 USD. Revenues were slightly lower at a consensus of $ 13.77 billion, while EPS, which benefited from $ 4.3 billion share buybacks and a lower-than-expected tax rate of $ 13.7 billion. %, exceeded consensus by $ 1.46.
After investors digested Facebook's report and earnings information (see results soon), equities rose 2.1%, shares rose 3.1% to $ 150.80 after hours closure.
Here are some points to remember from Facebook's report and call.
1. Facebook has slightly improved its revenue forecast for the fourth quarter
In July, Facebook predicted that its annual revenue growth rate, which was 42% in the second quarter, would decline sequentially by a high single digit percentage in both the third and fourth quarters. However, after seeing its revenue growth plummet by 9 percentage points in the third quarter, the company now expects growth to fall from a mid-to-high percentage in the fourth quarter.
This is not exactly a major revision of the orientation. However, the expectations before benefits being rather weak, the prospects are welcomed.
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2. Growth in spending will remain high in 2019, but should slow down thereafter
Facebook has slightly reduced its forecast spending for 2018. The company is now expecting 2018 GAAP costs and charges to grow by 50% to 55%, after having already forecast a 50% to 60% growth. And, while capital spending is still expected to rise sharply from the $ 6.7 billion recorded in 2017, the investment budget has been reduced to $ 14.5 billion from $ 15 billion previously.
Nevertheless, CFO Dave Wehner has guided in his call for costs and expenses to increase from 40% to 50% in 2019, which is above consensus before profits for 33% growth. Similarly, which is good news for chip and computer companies serving cloud data centers, it has set a 2019 capital expenditure budget of $ 18 billion to $ 20 billion in 2019 a consensus of over $ 17.3 billion.
For their part, Wehner and Mark Zuckerberg each suggested that Facebook's spending growth would slow down beyond 2019. "I know we need to make sure our costs and revenues are better adapted over is something that I'm also focusing on, "said Zuck, who also said that the growth in security spending would slow down from 2020. Wehner, for his part, suggested that changes in the operating margin "moderate" after next year.
3. Usage pressures in North America and Europe continue
With the qualifier that recent accounting changes have affected its daily active user (DAU) and monthly (MAU) accounts by 15 million and 9 million respectively, Facebook reported 1.49 billion SAD in the third quarter ( up 9% per year) and 2.27 billion MAUs 10%), below the consensus estimates of 1.51 billion and 2.29 billion.
In addition, in North America, which still accounts for 47% of Facebook 's revenues, the SADs remained unchanged and the UAE increased by only one million. In Europe, which accounts for 24% of sales, SADs and MAUs have decreased by one million sequentially (according to Wehner, accounting changes and GDPR regulations have had an impact).
It should be noted here that Facebook's DAU and MAU accounts only cover basic users of Facebook and Messenger and exclude Instagram and WhatsApp users who do not have access to the first two services. During the call, Zuckerberg admitted that Facebook's core "can be almost saturated" in developed countries such as the United States, and that, unlike its efforts to grow Instagram Stories and WhatsApp Status, which have all experienced tremendous growth, the efforts of his company To move the activity of the main thread of news from Facebook to Facebook, Stories did not pass as easily as it l & # 39; 39; hoped.
The total use of the basic Facebook application, which still benefits from healthy growth in emerging markets such as India, Indonesia and the Philippines, would be "generally stable". Encouraging statistics: The use of the Facebook Watch video platform has tripled in the United States in recent months.
4. Ad impressions are now growing much faster than ad prices
The average price of Facebook ads, which has risen sharply for much of 2017, due to the effectiveness of the company's advertising products and targeting / measurement tools, prompting advertisers to increase the price of their ads. Purchase of Facebook ads, has only increased by 7% per year in the second quarter. This represents a drop of 17% in Q2 and 39% in Q1.
In contrast, Facebook's advertising impressions increased 25%, an improvement over the 21% growth in the second quarter and the 8% increase in the first quarter. Wehner said that ad price growth is affected by the fact that Facebook's growth in impressions is driven by "product areas and geographies that monetize at relatively lower rates," such as Instagram Stories and Emerging Markets.
5. Facebook remains upbeat about monetizing stories, but warns that it's still early
"I'm optimistic that ads and stories will perform as well as food over time, and that the opportunity will be even greater, as stories seem to be a bigger medium." than that used by Feed, "insisted Zuckerberg. Similarly, Operations Manager Sheryl Sandberg compared Facebook's current efforts to get advertisers to adopt Stories ads to previous attempts to promote news feeds, Instagram feeds, and video ads. "I think we did it well this time," she said.
At the same time, Mr. Zuck reiterated that the monetization of Stories was still in its infancy and it was expected that streaming ads would "continue to generate most of our growth over the next two years" . And while Wehner said that Stories ads offered a major opportunity for ad impression growth, he added that it would take years before the pricing of ads by Stories matched that of RSS ads.
6. Facebook does not expect much revenue from Messenger and WhatsApp next year
Facebook has begun posting ads for some Messenger users in the app's home tab. It has also deployed a programming interface (API) for WhatsApp business accounts through which companies pay email users under certain circumstances, and plans to start running ads for WhatsApp Status story content. ;next year.
Nevertheless, Facebook expects its main application and Instagram to remain its main revenue growth drivers in 2019. "[I]If we start to see real success in Stories, messaging is much more advanced and what we do on Messenger and WhatsApp really ensure that companies can communicate with people, then in the early stages of messaging testing. " said Sandberg.
7. More than 2 billion people now use one of Facebook's daily services
Three months ago, Facebook revealed for the first time how many people were using at least one of its four core services – Facebook Basic, Messenger, Instagram and WhatsApp – monthly, claiming that this figure s'. amounted to 2.5 billion. In its third quarter report, the company revealed that this number had risen to $ 2.6 billion, adding that more than 2 billion people were using one of its major services daily.
With the official account of the Facebook DAU at 1.49 billion, this publication suggests that more than 500 million people use Instagram and / or WhatsApp daily without using the core of Facebook or Messenger.
Eric Jhonsa of TheStreet previously covered the Facebook results call and call through a live blog.
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