Facebook Beats Earnings but Revenue Down

October 31, 2018
603 Views

Facebook is one of the most valuable companies in the world, and a popular investment for both short-term traders and long-term portfolio builders. The company has released its latest earnings data, and the results are mostly positive.

This week’s earnings call has attracted new confidence from investors, and stock was up at the close of the market on Tuesday afternoon.

Earnings Per Share Exceed Analyst Expectations

Chief Financial Officer David Wehner spoke to investors and analysts during the company’s earnings call on Tuesday, announcing net income of $5.14 billion during the quarter. This equates to $1.76 per share, which is up slightly from the $1.59 per share that was reported in the same quarter last year. Analysts were significantly below in their own estimates, predicting just $1.46 per share before Tuesday’s call.

Total revenue was $13.73 billion, a strong increase over the $10.14 billion in Q3 of 2017. Despite growing year-on-year revenue, the reported figure was slightly below the $13.77 billion that the company expected.

Although revenue is slightly down from estimates, it’s still good news for investors. Facebook is still deriving most of its revenue from advertising. User growth on the platform has been strong, with 2.27 billion monthly users and 1.49 billion active users every day. Total engagement on the website is up 10%.

One problem that the company will need to address is the lack of user growth within North America. Canadian and U.S. numbers have flatlined, with around 185 million active daily users from both countries combined.

Facebook Revenue Growth Will Be Slow in the Fourth Quarter

Revenue growth is expected to slow, which may put pressure on the company to find ways of increasing profits through efficiency and cost cutting measures. Wehner told investors that revenue growth would likely be in the single digit percentages at the end of the current quarter.

Facebook is still a promising growth investment, although it is not fully clear how the company will diversify its revenue stream in the future. Advertising is currently the biggest money earner, and some investors see the single-minded approach as a liability.

Facebook has lost -19.95% of its stock value in the last 12-months. Investors who are confident about the future of the company could find that the current stock slump is the ideal time to buy.

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