by Ian Harvey
April 30, 2020
Facebook reported after the market closed on Wednesday beating analysts' estimates for quarterly revenue growth, up 18% in the first quarter, and said it has seen "signs of stability" for sales in April.
Stock Options Made Easy “Cut-to-the-Chase” and “Earnings Predictions” Members, at close of the market yesterday were up 271% and 111%, respectively.
UPDATE: Shortly after trading started Thursday -
“Cut-to-the-Chase Members” up 493% &
“Earnings Predictions Members" up 299%!
And much more to come this morning as the pre-market stock movement on Facebook is up more than 9.48% (+$18.41) at $212.60; approximately 6.00am.
Facebook reported first-quarter earnings of $4.9 billion, or $1.71 a share, compared with $2.43 billion, or 85 cents a share, in the year-ago period. Revenue grew 17% to $17.74 billion from $15.08 billion in the year-ago period. Analysts had estimated on average $1.74 a share in earnings on revenue of $17.33 billion.
Monthly average users improved 10% to 2.6 billion from 2.38 billion a year ago. FactSet analysts, on average, were expecting 2.55 billion.
But the company cautioned its business “has been impacted by the COVID-19 pandemic and, like all companies, we are facing a period of unprecedented uncertainty in our business outlook,” and declined to provide financial guidance for the second quarter and full year.
“Outlook is really uncertain,” Facebook Chief Financial Officer David Wehner said. “We have a really cautious outlook on how things are going to develop.” He noted a “broad-based pullback” in advertising among small and large businesses on the platform, which led to a decline in ad prices the last three weeks of the first quarter.
Facebook Chief Executive Mark Zuckerberg warned the economic and health impact of COVID-19 could linger for months during a conference call with analysts late Wednesday. It has also resulted in a recent surge of online communication among Facebook members and live-streaming gaming. FaceTime and video group calling, for example, have skyrocketed 1,000% over the past month, he said. Daily active users, meanwhile, increased 11% to 1.73 billion.
Some analysts have a gloomy outlook for Facebook's second quarter, with advertisers across industries slashing marketing budgets in response to virus-related uncertainty, including many of the small businesses and direct-to-consumer brands that market themselves heavily on Facebook.
Flat revenue in April indicates that the second quarter will be "more challenging" than the first, said eMarketer analyst Debra Aho Williamson, as countries emerge from lockdown and businesses reopen at varying rates.
“With Facebook’s video announcement last Friday, we believe the platform is well-positioned to deliver continued engagement growth as its digital living room strategy rolls out more broadly,” JMP Securities analyst Ron Josey said in an April 27 note that maintained an outperform rating and $215 price target.
On April 16 Facebook shares were removed from Wedbush's Best Ideas List after analysts raised concerns about the social-media giant losing ad revenue in light of the economic shutdown caused by the coronavirus pandemic.
The Wedbush analysts maintained their outperform rating and $250 price target but said much of the near-term upside was priced into the stock.
Chief Executive Mark Zuckerberg cautioned against a rush to end lockdowns.
"I worry that re-opening certain places too quickly before infection rates have been reduced to very minimal levels will almost guarantee future outbreaks and worse longer-term health and economic outcomes," he said.
Executives said Facebook will move forward with plans to hire 10,000 new employees this year, largely in product and engineering roles, but will pull back on hiring plans for business departments like ad sales.
Facebook lowered its guidance for total expenses in 2020 to $52 billion-$56 billion, down from a prior range of $54 billion-$59 billion, citing the slower headcount growth and savings from canceled travel, events and marketing.
Total costs for the first quarter rose just 1% to $11.84 billion.
"While this reflects a moderate reduction in the planned growth rate of total expenses, our overall expense growth in the face of expected revenue weakness will have a negative impact on 2020 operating margins," Facebook executives said.
Facebook has hardly been sitting idle. Last Friday it went head-to-head with the prominent videoconferencing company Zoom Video (ZM) - by unveiling a free group videochat platform.
And last week the company invested $5.7 billion into Reliance Jio, the digital technology arm of India's largest closely held company, Reliance Industries.
Facebook Inc. bought its way into India’s internet commerce sphere last week with a $5.7 billion investment in Reliance Industries Ltd., a sprawling conglomerate in everything from telecom to energy. They launched their first pilot within days, a program covering three Mumbai neighborhoods where consumers can send a "Hi," a monosyllabic greeting, to a designated number, bringing up an in-chat interface through which they then browse a catalog of goods on Reliance’s Jiomart, place an order and arrange for pickup.
That in itself is novel to much of the rest of the world -- shopping via a messaging platform. But in coming weeks, the pair are likely to add online payments -- a simple move expected to create a potential leader in India’s frenetic digital payments arena.
“This collaboration will bring hundreds of millions of Indians closer to online ordering and their first digital financial transactions,” said Nandan Nilekani, chairman of Infosys Ltd. and an architect of government-backed biometric identity system Aadhaar, the starting point for online transactions. “Competition between players will fuel innovation on better features and newer solutions, further driving adoption.”
Like other tech companies, Facebook is belt-tightening for the rest of the year. It expects capital expenditures of $14 billion to $16 billion in 2020, down from a previous range of $17 billion to $19 billion.
Facebook stock is up 0.6% in the past 12 months before earnings, while the S&P 500 index has improved 0.5%.
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