Shares of Facebook Inc. (NASDAQ: FB) surged after hours Wednesday after the social media giant posted better than expected quarterly results, shoring up confidence that Mark Zuckerberg’s company has moved passed the negative headlines.
Q1 2019 Earnings Summary
- Earnings: $1.89 per share ($0.85 per share after fine)
- Revenue: $15.08 billion
- Daily active users: 1.56 billion
Facebook Tops Estimates
After a disastrous second half of 2018, Facebook appears to be back on track at the start of the year. The company’s first-quarter earnings came in at $1.89 per share on revenue of $15.08 billion. Analysts had called for an EPS of $1.62 on revenues of $14.97 billion.
The social media network reported a daily active user count of 1.56 billion during the quarter, matching the consensus forecast. The company’s transition from News Feed advertising to its Stories features took a positive step. As Zuckerberg noted, the Stories features on Facebook, Messenger, and WhatsApp each crossed 500 million daily active users, joining Instagram, which achieved that feat at the start of 2019.
Despite falling 0.7% in regular trading on Wednesday, Facebook’s stock jumped double-digits after hours, eventually topping $200. It would eventually settle at $196.38, having gained 7.6%.
Facebook’s stock is up more than 46% from its December low, and that’s excluding the after-hours surge on Wednesday. By comparison, the Nasdaq Composite Index is up nearly 31% from its December bottom. Year-to-date, FB has outperformed the Nasdaq by a considerable margin.
A Small Caveat
As CNBC pointed out, Facebook’s actual per-share earnings were cut to $0.85 as a result of a one-time fine of $3 billion by the Federal Trade Commission (FTC). The company says the settlement could cost up to $5 billion, adding that “there can be no assurance as to the timing or the terms of any final outcome.”
Facebook has been the centre of an FTC probe since March of last year following reports that Cambridge Analytica, a political consulting firm, had accessed the data of 87 million Facebook users. The scandal rocked Facebook at its very core and eventually contributed to the biggest loss in the history of U.S. stock trading. In just one session, Facebook’s market capitalization plummeted by $120 billion.
In response to the backlash, Zuckerberg called for new regulations around political advertising, harmful speech and cybersecurity. He also led an organization-wide pivot toward encrypted services to protect user privacy. Ultimately, this means Messenger and WhatsApp will become the main platforms for users to communicate on the social media network.
Facebook is rising from the ashes again, proving that internal tensions, a privacy scandal and calls for Zuckerberg’s ousting from the Chairman position all pale in comparison to the raw numbers. These numbers show a growing social media network with plenty of runway to monetize and innovate. It remains to be seen whether 2019 and beyond will be a pivot in that direction.
Disclaimer: Author holds no investment position in Facebook at the time of writing.