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Facebook (NASDAQ:FB) reported another quarter of stellar results beating both EPS and Revenue estimates.

Revenue of $21.08 beat consensus of $20.9 billion while EPS of $2.56 beat the consensus of $2.53 by 1%.

This is the 9th straight quarterly beat and demonstrates what a strong competitive position Facebook is in.

Users continued to grow with monthly active users (MAU) up to 2.5 billion from 2.45 billion last quarter and 2.3 billion the same time last year.

Monetization of users was very strong up 16% over the same time last year.

Revenue per user (ARPU) hit $8.43 this quarter, up from $7.26 last quarter and $7.37 a year ago.

Even with antitrust concerns holding down the multiple, Facebook remains a juggernaut in digital advertising. This quarter’s earnings did nothing to change our view that this is a must-own tech stock until we see the U.S. government come knocking on the door. 

Facebook has outperformed the Nasdaq composite and most peers in the last 12 months, rising ~24%, beating out all peers but Snap.

FB Stock Second Best Performer in 2019

Source: YCharts

Even though revenue growth has been on the decline for Facebook, they have done an excellent job slowing the decline in 2019.

For a company generating $20 billion a quarter to be growing at almost 30% a year is a crazy achievement.

We suspect if Facebook starts to struggle with new avenues of growth, management can just pull back on investment and turn it into a dividend and buyback machine ala Apple.

Quarterly YoY Revenue Growth

Source: YCharts

Looking at profitability, Facebook continues to far outclass peers.

The EBITDA margin (a proxy for cashflow) is a full 70%-80% higher than Google and Twitter and far outclasses money-losing Snap and newly public Pinterest.

When you own a commanding piece of the online ad market you can generate above-average profits.

Facebook EBITDA is Still Way Above Peers

Source: YCharts

Looking at valuations, Facebook still looks slightly cheap, likely explained by all the worries about the government cracking down on the tech giants.

FB revenue growth should be slightly above 20% in 2020 with an EBITDA margin of 51% which is still far above Google, Twitter, and other social media stocks.

Facebook continues to be in a league of its own.

Forward P/S Multiple vs 2020 Sales Growth

Source: YCharts

About Author

Scott Willis

Scott has over 15 years of institutional investment management experience analyzing both debt and equity securities. He has held senior investment research roles at Credit Suisse, and TD Asset Management. His core areas of investment coverage at Grizzle include marijuana, energy and technology. Scott is a CFA charterholder and has been featured on Bloomberg, CBC, CNBC and Macleans.

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