Stock Update (NASDAQ:FB): Facebook Inc Reports Q1’16 Results and Announces Proposal for New Class of Stock


Facebook Inc (NASDAQ:FB) reported financial results for the quarter ended March 31, 2016.

“We had a great start to the year,” said Mark Zuckerberg, Facebook founder and CEO. “We’re focused on our 10 year roadmap to give everyone in the world the power to share anything they want with anyone.”

We also announced today that our board of directors has approved a proposal to amend and restate our existing certificate of incorporation to create a new class of non-voting capital stock, known as the Class C capital stock. If the proposal is approved, we intend to issue two shares of Class C capital stock as a one-time stock dividend in respect of each outstanding share of our Class A and Class B common stock. This proposal is designed to create a capital structure that will, among other things, allow us to remain focused on Mr. Zuckerberg’s long-term vision for our company and encourage Mr. Zuckerberg to remain in an active leadership role at Facebook. The adoption of the proposal is subject to the approval of our stockholders at our 2016 Annual Meeting of Stockholders to be held on June 20, 2016, and the record date for the payment of the Class C stock dividend would be set by the board of directors at a later date. More information will be available on our Investor Relations site and in our forthcoming proxy statement to be filed today.

First Quarter 2016 Financial Summary

Three Months Ended March 31,

In millions, except percentages and per share amounts

2016

2015

Revenue

$

5,382

$

3,543

Income from Operations

   GAAP

$

2,009

$

933

   Non-GAAP*

$

2,977

$

1,840

Operating Margin

   GAAP

37

%

26

%

   Non-GAAP*

55

%

52

%

Net Income

   GAAP

$

1,510

$

512

   Non-GAAP*

$

2,229

$

1,189

Diluted Earnings per Share (EPS)

   GAAP

$

0.52

$

0.18

   Non-GAAP*

$

0.77

$

0.42

*

Non-GAAP financial measures exclude amortization of intangible assets, share-based compensation and related payroll tax expenses. Non-GAAP net income and EPS also exclude the income tax effects of these non-GAAP adjustments. See the table below titled “Reconciliation of GAAP to Non-GAAP Results.”

First Quarter 2016 Operational Highlights

  • Daily active users (DAUs) – DAUs were 1.09 billion on average for March 2016, an increase of 16% year-over-year.
  • Mobile DAUs – Mobile DAUs were 989 million on average for March 2016, an increase of 24% year-over-year.
  • Monthly active users (MAUs) – MAUs were 1.65 billion as of March 31, 2016, an increase of 15% year-over-year.
  • Mobile MAUs – Mobile MAUs were 1.51 billion as of March 31, 2016, an increase of 21% year-over-year.

First Quarter 2016 Financial Highlights

GAAP

Year-over-Year % Change

Three Months Ended March 31,

In millions, except percentages and per share amounts

2016

2015

Revenue:

   Advertising(1)

$

5,201

$

3,317

57

%

   Payments and other fees

181

226

(20)

%

Total revenue(2)

5,382

3,543

52

%

Total costs and expenses

3,373

2,610

29

%

Income from operations

$

2,009

$

933

115

%

Operating margin

37

%

26

%

Provision for income taxes

555

Effective tax rate

27

%

Net income

$

1,510

$

512

195

%

Diluted EPS

$

0.52

$

0.18

189

%

(1)

Excluding the impact of year-over-year changes in foreign exchange rates, advertising revenue would have increased by 63%.

(2)

Excluding the impact of year-over-year changes in foreign exchange rates, total revenue would have increased by 58%.

Non-GAAP

Year-over-Year % Change

Three Months Ended March 31,

In millions, except percentages and per share amounts

2016

2015

GAAP revenue

$

5,382

$

3,543

52

%

Total costs and expenses

2,405

1,703

41

%

Income from operations

$

2,977

$

1,840

62

%

Operating margin

55

%

52

%

Effective tax rate

27

%

Net income

$

2,229

$

1,189

87

%

Diluted EPS

$

0.77

$

0.42

83

%

First Quarter 2016 Other Financial Highlights

  • Mobile advertising revenue – Mobile advertising revenue represented approximately 82% of advertising revenue for the first quarter of 2016, up from 73% of advertising revenue in the first quarter of 2015.
  • Capital expenditures – Capital expenditures for the first quarter of 2016 were $1.13 billion.
  • Cash and cash equivalents and marketable securities – Cash and cash equivalents and marketable securities were $20.62 billion at the end of the first quarter of 2016.
  • Free cash flow – Free cash flow for the first quarter of 2016 was $1.85 billion. (Original Source)

Shares of Facebook are up nearly 6% to $115.95 in after-hours trading. FB has a 1-year high of $117.59 and a 1-year low of $72. The stock’s 50-day moving average is $111.46 and its 200-day moving average is $105.66.

On the ratings front, Facebook has been the subject of a number of recent research reports. In a report released today, Oppenheimer analyst Jason Helfstein reiterated a Buy rating on FB, with a price target of $130, which implies an upside of 20.4% from current levels. Separately, yesterday, RBC’s Mark Mahaney reiterated a Buy rating on the stock and has a price target of $160.

According to TipRanks.com, which ranks over 7,500 financial analysts and bloggers to gauge the performance of their past recommendations, Jason Helfstein and Mark Mahaney have a total average return of 6.3% and 18.4% respectively. Helfstein has a success rate of 50.7% and is ranked #355 out of 3829 analysts, while Mahaney has a success rate of 63.1% and is ranked #8.

Overall, 2 research analysts have assigned a Hold rating and 36 research analysts have given a Buy rating to the stock. When considering if perhaps the stock is under or overvalued, the average price target is $138.00 which is 27.8% above where the stock opened today.