Wednesday, 25 July 2018 20:20

Facebook Shares Implode After Revenue, User Growth Disappoint

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Facebook shares were bid all day ahead of earnings, closing at a record high - up over 35% since the last earnings on April 25th - despite warnings of higher costs, lower user engagement, and investment in "time well spent" -- a term invented by a former Google employee to tackle the problems of technology addiction.

That was the good news.

Despite beating on earnings (Facebook 2Q EPS $1.74, Est. $1.72), Facebook shares are plunging after hours following a miss on revenues, MAUs, and DAUs...

  • Facebook 2Q Rev. $13.23B, Est. $13.33B (+42% YoY)

  • Facebook 2Q Monthly Active Users 2.23B, Est. 2.25B (+11% YoY)

  • Facebook 2Q Daily Active Users 1.47B, Est. 1.48B (+11% YoY)

“The core Facebook platform is declining,” said Brian Wieser, an analyst at Pivotal Research Group.

FB shares are down around 10% after-hours...

The size of the drop likely reflects the fact that this is a rare occurrence for a company that has consistently beat analyst and investor expectations.

Other details include:

Mobile advertising revenue – Mobile advertising revenue represented approximately 91% of advertising revenue for the second quarter of 2018, up from approximately 87% of advertising revenue in the second quarter of 2017.

Capital expenditures – Capital expenditures for the second quarter of 2018 were $3.46 billion.
Cash and cash equivalents and marketable securities – Cash and cash equivalents and marketable securities were $42.31 billion at the end of the second quarter of 2018.

Headcount – Headcount was 30,275 as of June 30, 2018, an increase of 47% year-over-year.

A massive rise in headcount appears to confirm that analysts dramatically underestimated the impact of Facebook's scandals on user engagement. Who could have guessed - an army of free speech censors and the exposure of various privacy invasions may have spooked more than a handful of potential users.

From CEO Zuckerberg in the press release:

"Our community and business continue to grow quickly," Zuckerberg said.

"We are committed to investing to keep people safe and secure, and to keep building meaningful new ways to help people connect."

Facebook hasn't missed top line estimates since it's different this time? Or BTFD?

The rest of FANGs are under modest pressure...


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