Trading Strategies & Tech
Facebook is the New Apple
09 May 2016
Apple is no longer the innovation leader in the tech industry. It’s left that crown for Facebook. The social media company continues to wow investors and analysts at just about every turn. Its latest earnings report was yet another nice surprise, shattering expectations on the top and bottom lines. Let’s take a look at the highlights:
- Earnings per share of $0.77 beat analyst estimates by $0.15. That’s also an 83.3% increase from this time last year.
- Revenue came in at $5.38 billion, a 52% increase year over year and beating the consensus by $120 million.
- Ad revenue was up 57%, while payments/other fees were down 20%.
- Monthly active users rose 4% quarter over quarter and 15% year over year to 1.65 billion. That’s not including Instagram and WhatsApp, which have 400 million MAUs and 1 billion MAUs, respectively.
- Mobile accounted for 82% of ad revenue, up from 80% a year ago.
- Non-GAAP expenses grew 41% year over year.
- The company plans to split its stock via a new issue of class C shares.
Suffice it to say, Facebook is firing on all cylinders and it’s time bears came around. The first reason is that the social media giant has done something no other social media company has ever managed. Despite having more than one and a half billion users, it still manages to add more at an impressive rate.
For example, Twitter had only 3% MAU growth from this time last year. LinkedIn is also suffering from engagement problems, with only a quarter of its user base using its site every month.
But also unlike its competitors in the social media space, Facebook has been steadily building a wide moat over the last year and a half. As we already mentioned, non-GAAP expenses grew 41% year over year during the quarter, meaning the company is continuing to spend more and more to invest in its core product and expanding its presence beyond social media.
One of those avenues is through virtual reality. The company launched the Oculus Rift VR headset earlier this year and is poised to continue to be an important player/trailblazer in the virtual reality market.
Another avenue is expanding its social media reach to provide more services. For example, bots are coming to the company’s Messenger app, providing customer service and information to users. There’s also the potential of turning Messenger into a mobile payment giant. At least that’s what analysts speculated when Facebook hired David Marcus, former CEO of PayPal, to take over the Messenger app. And with 900 million active users, it certainly has the user base to get off to a great start.
Conclusion
Those who have been bearish on Facebook can’t be blamed. The tech sector has been rife with companies that promise everything and deliver nothing. Facebook, on the other hand, has impressed Wall Street time and time again, and it’s gotten to the point where it’s should no longer be considered sane to bet against the company. It’s the new Apple. It’s the future.
Read More:
