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Facebook’s shares soar on stellar earnings

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Facebook’s shares soar on stellar earnings

Shares of the social media giant, Facebook (NASDAQ:FB) , moved sharply to the upside following strong second quarter results after the market close on Wednesday. The company beat analyst consensus estimates on both the top and bottom lines. Facebook posted earnings per share of $0.19 cents on revenues of $1.81 billion. These results were drastically higher than the $0.14 earnings per share on $1.62 billion in revenues analysts were hoping for. Early in the session on Thursday shares continued their path to the upside by moving higher by 25% to $33.25 per share.

Let’s quickly take a look at some of the key metrics analysts will be using in the coming weeks to reconfigure their spreadsheets. Facebook had 819 million mobile monthly active users as of the end of June, up 51% on a year over year basis. Daily active users were 699 million in June 2013, up 27% on a year over year basis. The closely watched mobile advertising data came in strong with 41% of total ad revenue for the second quarter, or about $656 million, up from 30% during the prior quarter. Total advertising revenues rose 61% to $1.60 billion on the back of sharp per user increases. Average per user revenue rose 32% to $1.60 from $1.21 in the second quarter of last year.

While shares have slumped since the highly publicized IPO just a couple years ago, this move is definitely helping the vast number of retail investors whom have watched their savings decline. The majority of the slide in my opinion can be attributed to fears the company couldn’t monetize its traffic in combination with declining relevance. Perhaps the nullification of this thesis is the cause of the great spike this morning. We can no longer argue, at least today, Facebook is losing relevance when we see dramatic increases in the number of active users. The company has proven its ability to monetize its mobile user base, something which will become increasingly important as the world becomes increasingly mobile. Buying the stock on the move today is risky to say the least, however, if the broader market does pullback, I would bless a speculative position in shares of Facebook.

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