Facebook's Earnings Helped by Strong Mobile - Analyst Blog
April 24 2014 - 9:25AM
Zacks
Facebook Inc. (FB) reported strong
first-quarter 2014 results, which reflected its growing dominance
in the mobile advertising market. Earnings of 25 cents per share
were much better than the Zacks Consensus Estimate of 18 cents.
Revenues also comfortably beat the Zacks Consensus Estimate of
$2.36 billion.
Following the results, Facebook announced the resignation of David
Ebersman from the position of Chief Finance Officer (CFO) and will
be replaced by Dave Wehner.
Quarter Details
Revenues (excluding the foreign exchange effect) surged 72.2% from
the year-ago quarter to $2.51 billion. The strong revenue
performance was aided by robust advertising revenues that jumped
82.7% from the year-ago quarter.
Advertising revenues were driven by increasing mobile engagement,
higher number of marketers, continuing investment in new products
and robust performance of its newsfeed ads.
Mobile ad revenues were $1.3 billion, which accounted for 59.0% of
ad revenues, up from 53.0% in the previous quarter. Ad revenues
from desktop increased 8.0% on a year-over-year basis.
Mobile-only Monthly Active Users (MAU) was 341 million at the end
of the first quarter compared with 189 million in the year-ago
quarter and 296 million in the previous quarter. Messenger and
Instagram both achieved 200 million MAUs during the last
quarter.
In the last quarter, Facebook achieved strong growth from
advertisers across mobile gaming, e-Commerce and consumer-packaged
goods verticals.
As of Mar 31, 2014, Facebook’s MAU improved 15.0% year over year to
1.28 billion. Mobile MAUs surged 34.0% year over year to 1.01
billion. Daily Active Users (DAU) increased 21.0% year over year to
802 million.
Ad impressions declined 17.0% on a year-over-year basis, primarily
due to lower ad volumes on mobile devices. However, average
effective price per ad soared 118.0% from the year-ago quarter
driven by favorable mix shift toward high-priced newsfeed ads.
Average revenue per user (ARPU) increased 48.1% year over year to
$2.00.
Payments and other fees increased 11.0% year over year to $237.0
million in the reported quarter. Payments revenues from games grew
approximately 1.0% on a year-over-year basis.
Total cost and expenses as percentage of revenues plunged to 57.0%
from 74.4% reported in the year-ago quarter. Research &
development, marketing & sales and general & administrative
expenses decreased 190 bps, 100 bps and 460 bps, respectively.
The lower-than-expected increase in operating expenses drove
operating margin, which surged from 25.6% in the year-ago quarter
to 43.8% in the first quarter. Net income was $639.0 million or 25
cents per share compared with $217.0 million or 9 cents in the
year-ago quarter.
Facebook exited the quarter with cash & cash equivalents and
marketable securities of $12.63 billion compared with $11.45
billion in the previous quarter. The company generated $1.29
billion of cash flow from operating activities compared with $1.23
billion in the previous quarter. Free cash flow was $922.0 million
compared with $748.0 million in the last quarter.
Guidance
Facebook expects to carry on with its investments for improving the
quality, engagement and value of its ads and products, which will
further boost advertisers’ demand over the long term.
Management expects that year-over-year advertising revenue growth
rate will decline due to tough comparisons. Total expenses
(including cost of revenues but excluding stock-based compensation)
are expected to increase approximately 40.0% to 45.0% for 2014.
Capital expenditure is likely to be in the range of $2.0 to $2.5
billion for 2014.
Our Take
Facebook has gained significant traction in its mobile ad business
within a very short span of time. This combined with the massive
user base and its ability to track personal details over time makes
it a formidable force in the online ad market.
We believe that Instagram’s growing popularity and the new
initiatives such as Internet.org will continue to boost Facebook’s
user base, going forward. We expect the company’s international
revenue per user to increase at a faster rate, going forward.
Moreover, the new products will help the company to face
intensifying competition from the likes of Yahoo!
(YHOO), Twitter (TWTR) and Google
(GOOGL).
However, overdependence on advertising revenues for growth will be
a headwind, going forward. We note that Facebook’s recent
acquisition of WhatsApp and Oculus are long-term growth
opportunities. The Internet.org initiative is also long-term
focused. Hence, lack of revenue diversification remains a major
concern in the near term.
Currently, Facebook has a Zacks Rank #2 (Buy).
FACEBOOK INC-A (FB): Free Stock Analysis Report
TWITTER INC (TWTR): Free Stock Analysis Report
YAHOO! INC (YHOO): Free Stock Analysis Report
To read this article on Zacks.com click here.
Meta Platforms (NASDAQ:META)
Historical Stock Chart
From Aug 2024 to Sep 2024
Meta Platforms (NASDAQ:META)
Historical Stock Chart
From Sep 2023 to Sep 2024