¨Facebook (NASDAQ: FB) released its highly-anticipated Q3 report on Tuesday, October 28th. In the past 10 years since Facebook’s inception, the website has gone from a mere vision in a Harvard dorm room to a household name and cornerstone of social media.
Q3 Report Highlights:
In the Q3 report, Facebook reported $0.43 earnings per share on a Non-GAAP basis, beating the analyst consensus of $0.40 and marking a 59% year-over-year increase. Facebook posted revenue of $3.20 billion, beating the analyst estimate of $3.12 billion and marking a 59% year-over-year increase. Additionally, Facebook saw a year-over-year increase in both daily active users and monthly active users, increasing to 864 million and 1.35 billion, respectively.
Facebook’s Q3 report triggered mixed reactions. Investors were pleased that the Q3 report came in ahead of all projected earnings and that Facebook experienced its first $3 billion quarter. The 14% increase in mobile users from last quarter also gave investors a reason to celebrate. However, not everyone was thrilled by the report. Wall Street was quick to note that user growth had slowed to 2.27% from 3.125% last quarter. Some argue that this is inevitable as Facebook becomes more and more widespread. Specifically, user growth considerably slowed in Asia, where Facebook currently has 426 monthly average users. Additionally, Facebook has yet to see any profit derived from WhatsApp; a messaging application that it bought for $19 million in February of this year. Mark Zuckerberg, Facebook founder and CEO, doesn’t seem fazed by this as he explains, “For us, products really don’t get that interesting to turn into businesses until they have about one billion people using them,” focusing efforts on increasing the user base from the current 600 million users before trying to turn a profit.
Moreover, the public was troubled that Facebook did not release user data specifically on teen usage; a demographic that could have a significant impact on overall user data. Some believe that teens are not flocking to Facebook as quickly as they once were, but this data has not been verified.
Overall, Zuckerberg seemed pleased with the quarter. “This has been a good quarter with strong results. We continue to focus on serving our community well and continue to invest in connecting the world over the next decade,” he said in a statement.
A Financial Expert’s Opnion:
Victor Anthony of Topeka Capital is bullish on Facebook with a Buy rating and a price target of $96.00. Anthony explained, “Facebook reported revenues that were 2% ahead of our estimate driven by a giant leap in ad pricing that offset a greater than expected decline in impressions… Engagement increased to all-time highs as 864M users now use the platform daily.” He noted growth in advertising revenue and attributed it to the “redesign of the right hand column ads to larger ad formats.”
Anthony also addressed that Facebook mentioned the phrase “investment year,” which is concerning to many investors and often sends stocks “spiraling downwards.” However, Anthony remains optimistic because “investments lead to higher revenue growth and a strengthening of ecosystems.” Anthony expects Facebook to beat their expense guidance in 2015, just like they did in 2013.
Victor Anthony has a 64% overall success rate recommending stocks with a +18.6% average return per recommendation. He has rated Facebook 26 times with a success rate of 92%.
Victor Anthony’s Past Recommendations
Anthony has a history of rating stocks in the technology sector, specifically AOL (NYSE: AOL) and Google (NASDAQ: GOOGL). He has a success rate of 80% recommending AOL and a 53% success rate recommending Google.
However, Anthony has not always been on point with his recommendations. He has rated Twitter (NYSE: TWTR) 11 times and earned a success rate of 36%. Victor Anthony has a steady history of rating stocks, but do you trust this recommendation?
Facebook’s Q3 report boasted record-high revenue, but Wall Street was quick to point out slowing growth rates. Facebook is investing in new projects, such as WhatsApp, leaving analysts like Victor Anthony optimistic that Facebook will continue to be a profitable stock in the future.
On average, the top analyst consensus for Facebook is Strong Buy.