Red-hot Facebook's problem: Staying hot
The social network's blowout quarter counters the naysayers. Keeping this torrid pace will be the hard part.
Ever since Facebook (FB) went public last year, investors have repeatedly questioned whether the huge social network would be able to make money in its mobile business. Well, it did just that in the last quarter.
Revenue at the Menlo Park, Calif., company rose 53% to $1.81 billion as mobile advertising surged 76%. Facebook earned $333 million, or 13 cents a share, in net income. That reversed a net loss of $157 million, or 8 cents a share, in the year-ago period. Excluding one-time items, profit was 19 cents a share. Analysts expected profit of 14 cents a share on sales of $1.62 billion.
To call this a blowout would be an understatement. The results were especially surprising considering the recent disappointing earnings reports of tech stalwarts such as Google (GOOG) and Apple (AAPL). Shares of Facebook, whose IPO was derided as a flop, rose 29.6% in trading Thursday. As a result, CEO Mark Zuckerberg's fortune swelled by an estimated $3.8 billion. Not bad for a day's work.
Wall Street analysts, who had until recently thought Zuckerberg's company could do no right, now seem to believe it can do no wrong. Not surprisingly, the company's executives are feeling pretty good.
"This quarter represents a strong validation that we're effectively navigating the shift to mobile," Facebook chief finance officer David Ebersman told Bloomberg News.
The one downside -- if you want to call it that -- to Facebook's spectacular results is that investors are going to expect the company to perform as well, if not better, in subsequent quarters. That's going to be tough to pull off over the long run for many reasons.
Indeed, as Bloomberg noted, Facebook is expected to take 13% of the global mobile ad market, but that's way less than Google, which is forecast to capture 56%.
And Facebook will need to keep an eye on its bottom line.
Excluding share-based compensation and related payroll-tax expenses, costs and expenses rose 52% to $669 million in the latest quarter. Having costs expanding at the same rate as revenue is usually cause for alarm. Facebook, however, isn't a typical company.
But investors who may be tempted to join the Facebook bandwagon now should sit tight. The stock is way too expensive to buy at the moment, with a price-to-earnings ratio that tops 734. Eventually, the shares will come back to earth, but given the mania surrounding the company right now, that might take a while.
Jonathan Berr does not own shares of the listed stocks. Follow him on Twitter @jdberr.
"Faceplant" is breathing it's last breaths. The latest "explosion" of it's stock price is a ploy to get "zuckers" to buy in so it gets back to its IPO price, and all those so heavily invested in this mirage (including Zuck) can cash out and break even.
Check back in a year. You'll see. The house always wins.
Facebook has it`s MOJO back.The stock will be $100 by Christmas.10 years ago Apple was
$7 a share.
Copyright © 2014 Microsoft. All rights reserved.
Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.
[BRIEFING.COM] The S&P 500 has inched up from its worst level of the session, but that could be overlooked considering the index remains lower by 28 points.
Today's retreat has sent the benchmark average below its 50-day moving average (1953) for the first time in a while. Specifically, the index tested, but never closed below the 50-day average on six occasions during a three-week stretch between late April and early May. Prior to that span, the S&P 500 dove below the 50-day ... More
More Market News
The high-definition camera maker gives its first earnings report as a public company Thursday afternoon.
MUST-SEE ON MSN
- Video: Easy DIY smoked meats at home
A charcuterie master shares his process for cold-smoking meat at home.
- Jetpacks about to go mainstream
- Weird things covered by home insurance
- Bing: 70 percent of adults report 'digital eye strain'