Facebook earnings OK, but no guidance?

The company meets profit expectations and slightly beats on revenue its first quarterly release. CEO Zuckerberg participates in the conference call.

By Kim Peterson Jul 26, 2012 4:36PM
Facebook (FB) didn't exactly hit a home run in its quarterly earnings report Thursday, but it didn't disappoint, either. Still, investors were concerned and took the stock down to record lows in after-hours trading.

The social networking company reported an adjusted profit of $295 million, or 12 cents a share, on $1.18 billion in revenue. That was in line with analyst expectations on profit and slightly more than the $1.15 billion expected in revenue. If you include costs related to share-based compensation and payroll taxes, Facebook reported a loss of $157 million, or 8 cents a share.

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The company did not include any guidance or forecasts in its report, which stunned investors. In fact, the release was surprisingly light on details.

Shares of Facebook were tanking in after-hours trading, falling more than 10% to a record low of under $24. That was on top of losses of 8.5% earlier in the day.

Thursday's report was the first time Facebook offered earnings as a public company, and the event was closely watched by investors. They wanted to know if CEO Mark Zuckerberg would participate in the earnings call (he did) and if Facebook would show any traction on mobile advertising (not yet).

But mostly, they wanted to know if Facebook could move past the drama surrounding its disappointing IPO and gain any momentum. The answer to that remains unclear.

Facebook said the number of worldwide daily active users rose 32% from a year earlier to 552 million in June. But at the end of March, the number of daily active users was 526 million. That's a gain of just under 5% in three months -- a significant slowdown from growth of 9% from December to March. In fact, that was one of the slowest quarters of user growth in company history.

Furthermore, much of that new growth came from Brazil, India and Japan -- areas that don't offer as much per-user revenue as the United States. The amount of revenue per user that Facebook gets rose by just 2 cents to $1.28.

More Facebook users are moving to mobile, an area in which Facebook is just starting to grow advertising. As a result, the company said, ad impressions are growing more slowly, and fell 2% in the U.S.

Facebook's operating margin has fallen to 43% from 53% a year earlier.

The share price drop during the trading day was largely related to the poor earnings report Wednesday from Zynga (ZNGA), the online gaming company that is a key business partner for Facebook. Zynga missed analyst expectations on revenue and earnings. It also cut its guidance for the year, based on a delayed product rollout and weaker user numbers from Facebook.

Zynga's numbers triggered investor concern that Facebook would also have problems in the quarter.

Facebook has been in the investor doghouse since its May 18 initial public offering. The company raised $16 billion after the IPO was priced at $38 a share, but the stock stumbled in its first day of trading and closed at $38.23. The stock fell below $30 within weeks, and though it managed to climb back over $30 earlier this summer, it's been below that point for nearly the last two weeks.

The reaction to Facebook's earnings was widely varied. "A little bit of earnings guidance, a little bit of optimism about future performance would have been nice," Jordan Rohan, an analyst at Stifel Nicolaus, told Bloomberg.

"The big question with the stock is how it will monetize its billion or so users," Michael Matousek, a senior trader at U.S. Global Investors, told Reuters. "A lot of people think they can't convert those users to money. It doesn't look good with this new information out there. I don't want to say the story is broken, but the story is kind of broken."
Tags: FBZNGA
16Comments
Jul 26, 2012 4:43PM
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Nice to see investors making FB prove themselves a bit. When a company comes out of nowhere with little in the way of product (i.e. no serious barriers to entry), it can go away just as quickly.
Jul 27, 2012 8:45AM
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The stock is a joke as is the whole concept of social networking....the investors get what they deserve and what facebook is worth....nothing.
Jul 27, 2012 9:20AM
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I don’t care what happens to Facebook or Zinga stock prices at this point. Even if they go to $100 per share (which they won’t unless the Fed prints another $trillion dollars), I’m just glad I don’t have to ride through this sham of a roller coaster ride foisted on the investment community by Wall Street. I didn’t touch the Facebook IPO with a ten foot pole. I can’t believe so many highly paid professional investment managers did. Today, I’ve lengthened it to a fifty foot pole. Good luck to Facebook now if they ever want to raise any more equity capital.

Jul 27, 2012 8:33AM
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Only a fool woud buy Facebook stock. This company will go down in history as a major disappointment, mark my words. And it'll be history inside of 10 years.

Jul 27, 2012 7:29AM
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In reality they lost 8 cents / share. In my company payroll taxes and share based compensation do have to be paid and that money comes out of the company.
Jul 26, 2012 8:34PM
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I think the stock is really only worth $12-15 per share.  August 19 will be a big day to see how much was be sold.  It is a dog right now but the product is good.  What if they charged $5 per month for access?  Users will drop but not to 0.  It will still be popular and people will absorb the cost until something just as good comes out.  Think about AOL.  Once the fees start (which they will) that's when this company stock will takeoff.  I didn't buy shares because I was one of the ones that found out the IPO was going to bust by JPMorgan 3 days prior.  I'm waiting for $15/share.

 

Jul 27, 2012 10:51AM
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Hey FB investors:

How does it feel to be a Suckerberg?

Jul 27, 2012 10:11AM
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FB is full of people living their lonely lives thinking that what they post will fullfiil them. Investing in FB is going to only make the FB insiders rich. Remeber Myspace?
Jul 27, 2012 9:58AM
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Get ready for a wave of analysts and market reporters littering every financial section of every news website with articles revealing new insights as to why Facebook is such a great buy now. Please overlook the fact if you read them that many of those uh, independent writers are being compensated in one way or another by Facebook’s marketing department. 

 

That’s you too Cramer.

Jul 27, 2012 11:29AM
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I've lost enough money in stocks to realize that one of the strongest sell signals you can get is when the Indices go UP, whereas your favorite stock goes DOWN. 

What do you suppose is going to happen to your favorite stock when the market tanks, pray tell?

Ever stock I've held that has gone down when the indices as a whole go up, I've lost big time.

Therefore FB = Strong Sell.

Jul 27, 2012 11:33AM
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You wall street types make me sick.  They had good growth, and if you believe what's said the one time charges resulted in the loss.  You pinhead wall street types have unrealistic expectations.  Another good example is apple, just because they didn't do what you expected even they made more $, you down grade it - ridiculous!
Jul 26, 2012 4:58PM
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Yes meeting numbers and slightly beating them totaly merits and 8% drop.
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