Facebook (FB) Goes On a Wild Ride Following Robust Third Quarter Earnings

Shares of Facebook (FB) went on a roller coaster ride last week, after the social networking giant reported its third quarter earnings.

Facebook reported adjusted earnings of $0.25 per share, or $621 million, double the $0.12 per share, or $311 million, it earned in the prior year quarter. Revenue climbed 60% year-over-year to $2.02 billion.

Analysts had expected the company to earn $0.19 per share on revenue of $1.91 billion.

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Yet despite smashing analyst estimates, investorsâ reactions were mixed due to a statement by CFO David Ebersman that use among younger teens was declining. The idea that Facebook was already losing its potentially largest audience before they matured was a disturbing one, and sent shares down 3% over the past week.

However, during the quarter, Facebookâ s monthly mobile active users rose 18% to 1.19 billion from the prior year quarter. Advertising revenue soared 66% to $1.8 billion, fueled by a strong growth in mobile users. Revenue from mobile ads accounted for 49% of Facebookâ s total advertising revenue at $880 million -- a huge gain from the $150 million it reported in the prior year quarter.

Facebookâ s growth in mobile is impressive, since other established rivals such as Microsoft (MSFT), Google (GOOG), and Yahoo (YHOO) have had difficulty monetizing mobile platforms. Google, in particular, had to combine all its mobile and desktop platforms into a single platform to boost total advertising revenue. Meanwhile, Facebookâ s non-GAAP operating margin climbed from 42% to 49%.

Facebook could be well poised for long-term growth. According to research firm eMarketer, Facebook is expected to claim a 15.8% share of worldwide mobile ad spending in 2013 -- up from a 5.35% share in the prior year. Googleâ s growth in mobile ad spending, on the other hand, is only forecast to edge up from 52.36% to 53.17% this year.

Facebook noted that it has 1.19 billion monthly active users, an 18% increase over the prior year quarter. Daily active users rose 25% to 728 million. CEO Mark Zuckerberg remained focused on the future of the company, stating, â

Published on Nov 8, 2013
By Leo Sun
Leo Sun
Leo Sun is a freelance finance writer and position trader. He focuses on a combination of value and momentum investing, with a strong interest in the trading philosophies of Warren Buffett and Peter Lynch. Leo also has experience writing articles to help small business owners acquire loans and manage their finances. He regularly contributes to the Stock of the Day analysis.

Copyrighted 2020. Content published with author's permission.

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