Facebook Earnings: What Wall Street Is Saying (Update 1)
Updated from 9:07 a.m. EDT to include updated information in the fifteenth paragraph .
Despite the impressive earnings beat, shares had given up most of their after-hours gains on concerns over ad engagement and questions over teens using the service. On the earnings conference call, Chief Financial Officer David Ebersman noted teens are using the service the same but daily users in the teen demographic slid from the second to the third quarter. The Facebook executive said there's no real accurate way to measure that, but the social networking giant is working on building something internally to figure out what's going on.
Even though the comments about engagement worried investors, Facebook still reported a massive beat to third-quarter estimates, earning 25 cents a share on a non-GAAP basis and generating $2.02 billion in revenue. Mobile revenue surged to 49% of total advertising revenue, which was about $881 million. Analysts surveyed by Thomson Reuters were expecting earnings of 19 cents a share on $1.91 billion in revenue.
As of the end of September, Facebook had 1.19 billion monthly active users (MAUs), up 18% year over year, with daily active users (DAUs) up 25% during the same time frame to 728 million users. Mobile MAUs grew 45% year over year to 874 million, with 507 million of them using the service daily at the end of the quarter.
Following the results, several people on Wall Street were positive on Facebook, the social networking giant. Here's what a few of them had to say.
TheStreet's Jim Cramer
"Facebook delivered a monster quarter, but it seemed that all anyone could focus on was a comment about how younger teens have decreased usage and how the company does not expect to significantly increase ads as a percentage of news feeds. The result? We got a real dead-horse beating about the peaking of Facebook and, even though ad revenue grew 60% and mobile ads are now 49% of the business and the company generated $1.8 billion in ad sales, you left the call with a sense that Facebook's best times are behind it."
Oppenheimer analyst Jason Helfstein (Outperform, $60 PT)
"Following better 3Q results from Facebook, we are increasing our estimates and target. Third-quarter upside was driven by higher advertiser demand for newsfeed, mostly driven by price. Higher Int'l usage drove ad volume, while US was driven by pricing. After-hours trading suggested investors negatively reacted to mgmt commentary on maintaining "ads as a % of newsfeed stories." However, assuming usage continues to grow in 4Q, this should support further ad volume growth. We continue to believe FB ads are undervalued versus competitors' measured on revenue/hour, a 77%/66% discount vs. YHOO (with/without Search). Increasing '13E and '14E revenue by 2% and 5%, and non-GAAP EPS by 10% and 12%, respectively. Raising target to $60 from $54. Maintain Outperform rating."