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Facebook Soars On Earnings Beat

Facebook, Inc. stock saw huge gains in after hours trading Wednesday after the company announced their fourth quarter 2018 earnings. After gaining 4.32 percent over the trading day Wednesday, the stock soared by 11.5 percent in after hours.

“Our community and business continue to grow,” said Mark Zuckerberg, Facebook founder and CEO, in the earnings report. “We’ve fundamentally changed how we run our company to focus on the biggest social issues, and we’re investing more to build new and inspiring ways for people to connect.”

The company reported an impressive beat on both top and bottom line estimates. Facebook posted revenue of $16.91 billion compared with an estimate of $16.39 billion. On the bottom line, Facebook reported earnings of $2.38 per share, blowing away the estimated $2.18 per share.

While the stock has been through a turbulent year, and is still well off from it’s all time highs, the positive fourth quarter results and the market’s reaction to the news represents a more than 20 percent increase over the past month and in 2019 to date.

As Citron research’s Andrew Left predicted in late December, the controversies surrounding Facebook over the past year, and their impact on share price have provided a window of opportunity for investors who are able to see through the commentary to the fundamentals.

“2018 is a year that Facebook shareholders would like to forget, as the stock is down 30% YTD and over 40% from its recent high,” wrote Left in a late December research note. “Yet, while the media has reported on one scandal after the next and the NYT even tried to promote a #deletefacebook movement. The truth is revenues and more important user base has seen little impact.”

Not only has the social media powerhouse seen little to no impact on its fundamentals, the company continues to streamline, monetize, and grow. Total Revenue increased by 30 percent year-over-year, with the bulk of that coming from advertising. Looking towards the future, however, revenue from payments and other services grew by 42 percent over the past year. Moreover, Facebook was able to increase earnings per share by an impressive 65 percent over the past year.

While the past year has seemed to show stagnation in Facebook, the fact remains that the company was able to add one million daily users in the U.S. and Canada markets, even amid controversy. With the multitude of platforms now under the Facebook umbrella, adoption is likely to continue at a significant rate.

“We estimate that around 2.7 billion people now use Facebook, Instagram, WhatsApp, or Messenger (our “Family” of services) each month, and more than 2 billion people use at least one of our Family of services every day on average,” reads Facebook’s earnings release.

The team under Zuckerberg and Sandberg’s direction has certainly showed that they are capable of providing value to shareholders and bolstering growth even in  the face of controversy. Moving forward, it seems that there is a lot of rrom to growth for Facebook, even as adoption continues to flatten. The company has added one million advertisers in roughly the past year, and continues to explore revenue streams in online shopping and fintech services comparable to Cash App and Venmo.