Facebook, Inc. (Nasdaq: FB) reported second-quarter earnings after the bell on Wednesday, beating on earnings but narrowly missing on revenue and user counts. FB stock fell more than 7 percent in after-hours trading.
Facebook earnings by the numbers. The social media giant reported earnings per share of $1.74, beating Wall Street consensus estimates for $1.72.
Revenue came in at $13.23 billion in the second quarter, barely missing the $13.36 billion analysts expected.
But perhaps the numbers most FB shareholders were watching involved monthly active users (MAUs) and daily active users (DAUs).
Non-headline numbers impacting Facebook stock. Analysts surveyed by FactSet expected FB to report MAUs of 2.25 billion and DAUs of 1.49 billion.
But Facebook reported MAUs of 2.23 billion and DAUs of 1.47 billion, each up 11 percent year-over-year.
That, however, didn’t cut the mustard. FB stock is clearly reflecting that with its sudden tumble on Wednesday.
“It turns out there is indeed a direct correlation between data privacy scandals and daily active users on Facebook,” says Venkat Ramasamy, chief operating officer of FileCloud.
“The stock has had an epic run since March, so short-term-minded investors were ripe to sell off Facebook once a hint of a less than perfect quarter turned into a reality. Less time on Facebook means slower top-line revenue that had driven the stock to recurring all-time highs.”
Even with average revenue per user (ARPU) of $5.97, modestly higher than the $5.94 FactSet consensus figure, investors weren’t impressed. That’s nice to see, but when your base of users isn’t scaling like the market wants it to, ARPU becomes secondary.
The pullback put FB’s recent rally in very clear contrast. Hours prior to the release, Facebook stock hit all-time highs during intraday trading on Wednesday as investors eagerly bid up shares in anticipation of the results.
At Wednesday’s close, FB stock was up 29 percent in the last year and 21 percent in 2018, far outpacing the S&P 500, which was up 15 percent and 6.5 percent, respectively.
Pros and cons. As the world continues to become more mobile-centric, Facebook is positioned enviably. Mobile advertising revenue was 91 percent of total revenue.
And with tools like Instagram, WhatsApp and even the virtual reality company Oculus all in more nascent stages of monetization than the Facebook platform itself, the future looks pretty bright — MAU miss or no MAU miss.
This slump in Facebook shares, after a quarter that was more or less exactly in line with what Wall Street wanted, is myopic and a little silly. However, after a swift rally, a little pause might not be the worst thing in the world. This is still one of the most promising long-term tech stocks, and shareholders in it for the next few years should take this opportunity to pick up shares at a discount, not sell with the horde.
John Divine is an investing reporter for U.S. News & World Report, where he covers financial markets and the economy, with a focus on individual stock analysis. He has been an investor himself for over 10 years, and has been writing professionally about stocks and investing for the last five years. He previously wrote about the stock market for The Motley Fool and InvestorPlace, and his work has appeared on Yahoo! Finance, MSN Money, and AOL DailyFinance. He graduated from Appalachian State University in 2011 with a bachelor’s degree in finance and banking. At Appalachian, he was a member of the Bowden Investment Group, a team of students that ran a real-money portfolio worth over $100,000. You can follow him on Twitter or give him the Tip of the Century at email@example.com.
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