Facebook shares smash through investors expectations

Another quarter, another conquest.

If it sounds like a broken record, it’s because Facebook continues to do just that break financial records.

Wednesday, it reported a whopping $5.84 billion in its fiscal fourth-quarter revenue, up 52% from the same three-month period a year ago, and its first $1 billion quarterly profit (79 cents per share). The financial performance bested the projections of analysts polled by S&P Capital IQ, who expected $5.4 billion in revenue and earnings of 68 cents per share.

By any measure mobile user growth or advertising revenue Facebook is proving to be the template for Silicon Valley success story in the face of a roiling worldwide economy. While Apple CEO Tim Cook cautions of “extreme conditions” in Brazil, Russia and other markets, Facebook has retained its sheen.

For the past decade, Apple was the valley’s Teflon company, racking up record sales and profits that sent its market valuation into orbit. It was a phenomenal run that was a testament to compelling products, astute management and calculated risk-taking.

Yet with Apple facing a slow down in iPhone sales and its top-secret car project stuck in neutral, there is considerable angst over the company’s near future, reflected in a stock nose-dive of nearly 7% on Wednesday.

What’s happening to Apple now is what ailed IBM, Microsoft, Hewlett Packard before it: trouble maintaining breakneck growth in established markets popular with consumers and businesses while investing (betting?) on the next big things that are just a product cycle or two away. It’s nearly an impossible balancing act that even Google in all its glorious moon shots grapples with.

Facebook finds itself in the position Apple has been in: Benefiting fabulously from a strong product mix, fiercely loyal customers and the dynamic management duo of CEO Mark Zuckerberg and Chief Operating Officer Sheryl Sandberg.

As Yahoo and Twitter struggle, Facebook  now has more than 2.5 million advertisers and is expected to haul in $9.9 billion in display ad revenue this year, extending its lead in the U.S. market, by percentage, to 31%, according to market researcher eMarketer.

Facebook has extended its tentacles into virtual reality, messaging and photo-sharing and thus expanded its marketing and financial horizons through canny acquisitions that at the time were questioned as being too pricey (Exhibit A: Its $19 billion purchase of mobile-messaging service WhatsApp in early 2014.)

Photo-sharing site Instagram, called Facebook’s “story of the year” by RBC Capital analyst Mark Mahaney, is likely to ring up $2.4 billion in ad revenue in 2017, eMarketer says. Facebook snapped up Instagram for $1 billion in 2012.

Facebook’s success in drawing large crowds has endeared it to marketers and advertisers, and for good reason.[related-posts]

The social network’s dominance in mobile grew: Monthly active members accessing Facebook via a mobile device soared to 1.59 billion in its recently-completed fiscal fourth quarter, or 90% of its members. That’s more than the most-populous country, China, with 1.3 billion people. Twitter, by comparison, has 320 million members.

Facebook isn’t likely to rest on its digital laurels.

It has big plans for virtual reality. The first headsets from Oculus, the VR pioneer Facebook acquired for $2 billion in 2014, are scheduled to ship in March. By the end of the year, SunTrust analysts expect Facebook to sell 3 million of them for $1.8 billion.

Before handing the tech crown to Facebook, however, remember that the stock market can paint tech companies with the same brush, regardless of their stellar past quarter: Facebook shares are down 8% this year, just a bit better than the Nasdaq Composite.

[USA Today]


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