Facebook Shares Drop On Revenue Miss (cnbc.com)

Zorro shares a report from CNBC: Facebook missed projections on revenue and global daily active users this quarter after struggling with data leaks and fake news scandals. The company reported its second-quarter earnings after the bell on Wednesday. Shares were down as much as 10 percent. CNBC summarizes the results:

Earnings per share: $1.74 vs. $1.72 per a Thomson Reuters consensus estimate
Revenue: $13.23 billion vs. $13.36 billion per a Thomson Reuters consensus estimate
Global daily active users (DAUs): 1.47 billion vs. 1.49 billion, according to a StreetAccount and FactSet estimate
North American DAUs: 185 million vs. 185.4 million, according to a FactSet estimate
European DAUs: 279 million vs. 279.4 million, according to a FactSet estimate
Average revenue per user (ARPU): $5.97 vs. $5.95, according to a StreetAccount and FactSet estimate

Comments

Big deal

[110010001000]

The drop was after hours. At the close of the market FB hit an all time high with a market cap of over $618 billion. Definitely a good time to buy, just like Tesla is a good buy based on yesterdays dip.

Re:Big deal

[110010001000]

No it isn't back to where it was, it is still at the all time high. The drop was after hours. After hours trades are notoriously wrong due to the small number of shares traded.

Re:Big deal

[Anonymous Coward]

After hours trades are notoriously wrong due to the small number of shares traded.

After hours trades on regular days on regular stocks are notoriously wrong, but you really need some financial education to know why that doesn't apply here. This is an earnings report day for a highly traded stock and as I'm writing this FB is down 21 percent, or $46. That's not a blip that's going to be made up the next day absent news that nullifies an abysmal earnings forecast, and that's not at all on a small number of shares traded--27 million shares traded after hours vs 30.6 million traded the entire day.

I'd love to say it's a bubble bursting because I hate social media, but unlike people here I'm not going to let my personal loathing for it influence my thoughts on the stock. I will say that censoring and pissing off half the country over political views is not conducive to gaining more customers and earning more revenue though. Facebook and other such companies need to face up to the fact that the nation as a whole is not made up entirely of people who think like their employees do and they need to stop letting politics influence how they deal with customers of any political opinion. Otherwise, things like this are prone to happen.

My only regret is I chose to place earnings trades on other stocks today. This one looked like a perfect short, and of course it was beyond a perfect short, but I just don't trust tech stocks to behave in accordance with things like actual financial numbers. Today it did. Hopefully it'll keep doing that, but if social media companies traded for what they're actually worth they'd be penny stocks. Oh well, guess I had to make money on my other trades. I do feel sorry for millennials whose entire portfolios consist of Google, Facebook, Twitter, and Tesla though.

Valoe

[rossdee]

"Earnings per share: $1.74 vs. $1.72 per a Thomson Reuters consensus"

A one percemt drop im expected earnings causes a ten percent drop in share price? I thimkit was overpriced in the first place

Re:Valoe

[Anonymous Coward]

Drop is 23% now. Facebook getting smoked in after hours.

Re:Valoe

[ClickOnThis]

"Earnings per share: $1.74 vs. $1.72 per a Thomson Reuters consensus"

A one percemt drop im expected earnings causes a ten percent drop in share price? I thimkit was overpriced in the first place

Earnings actually beat the Thomson Reuters consensus. But that's just the consensus. Various analysts had estimates well above $1.74.

In the current after-market, the stock price is starting to bounce up from around $164. Was the sell-off an over-reaction? Probably. Sooner or later, the stock will recover.

And as for it being overpriced ... valuations can be weird, and the market can ignore them. Look at Tesla for example. There's no reason for its stock price to be above $300. Yet it is.

Re:Valoe

[Locke2005]

Personally, I think Musk is intentionally running down Tesla stock so he can buy a bigger share of the company. However, calling the diver a pedo still seems like bad judgement, not strategy. Musk doesn't want to make his second fortune selling cars, he wants to make his second fortune by being the Intel of battery manufacturing. Like CPUs, batteries appears to be a natural monopoly with huge barriers to entry that rewards the few companies that can afford to keep investing heavily in continuous improvement.

Seriously?

[smithmc]

Do I understand correctly that, in the quoted part of the posted story, the first number is the actual performance and the second one is the estimate? These numbers are essentially identical, i.e. FB hit its estimates almost precisely. So what's the problem, other than that investors are a bunch of histrionic idiots looking way too hard for something to get upset about?

Re:Seriously?

[Anonymous Coward]

The old advice "buy on the rumor, sell on the news" would apply here.

They were taking profits. The only histrionic idiot is you jackass. They probably had their sell orders in before the announcement.

Or as often as not, they pump up the earnings estimate to draw in retail suckers, so the street guys can buy cheaper after the suckers cleared out. Or they shorted the stock knowing earnings would be near consensus and "day traders" would sell shares for a measly 1% profit.

Re:Seriously?

[Quirkz]

Stocks are weird. The daily report on the radio will talk about them being "up" or "down" but then often explain it's only a tiny fraction of a percent, sometimes even a single point, which in my mind ought to be "essentially unchanged."

Sometime this week I heard "markets were mixed. The Dow was up $x, or roughly .8%. The NASDAQ was down one point." All I could think was, you really call that *mixed*?

Re:Seriously?

[Anonymous Coward]

Yup. When I was testing live ads (from Google) in one of my apps, I was surprised that it showing almost exclusively Facebook ads. If they have to do that big of an ad buy from their main competitor in internet advertising, it's not a good sign.

Re:Seriously?

[drinkypoo]

Sometime this week I heard "markets were mixed. The Dow was up $x, or roughly .8%. The NASDAQ was down one point." All I could think was, you really call that *mixed*?

The news is apparently not for you, but for HF Traders.

Re:Seriously?

[drinkypoo]

HF traders already have computers telling them this stuff. Hold a grudge much?

Against HFT? Absolutely. HFT harms actual investors.

You are right

[SuperKendall]

Look at Tesla for example. There's no reason for its stock price to be above $300. Yet it is.

You are totally right - just based on what has been delivered along with easy to see potential in technology Tesla has got working, along with new trade agreements, Tesla should be over $600. Don't worry, will be there really soon - we'll see over $1200 on TSLA during the epic short unwind though. Going to be fun to watch that one play out!

Re: You are right

[phantomfive]

That seems extremely and overly optimistic at this point. Not that I would complain to see it happen, I just don't think it will.

Stuff that doesn't matter

[ebcdic]

Can we stick to technical stuff please?

Re:Stuff that doesn't matter

[Locke2005]

If you do technology to make money, then this is news that matters to you! Personally, FaceBook has stayed in business much longer than I would have predicted and has made a lot more money than I would have predicted, and I can't explain why. But then, I can't explain why Donald Trump get elected either.

Re: Stuff that doesn't matter

[Anonymous Coward]

That's actually what your problem is. You assumed people are stupid and racist, which is why you just come across as a smug, condescending, elitist asshole.

Trump won because of people like you... Not despite of you.

Re:Stuff that doesn't matter

[rkordmaa]

~20% overnight swing of one of the most significant tech stocks is going to have an impact to tech. How much of an impact remains to be seen, could be anything from meh to another dot com bust.

Re:Stuff that doesn't matter

[TJ_Phazerhacki]

Talking about Earnings and Revenue is, by definition, Technicals.

Facebook is the new MySpace!

[Locke2005]

I deleted by FaceBook account several months ago, when reports of misuse of data started coming out. No kids use FaceBook for social media anymore, because their parents all have accounts and can see what they post! My daughter has moved to Instagram and SnapChat herself; no telling what she'll be using next year.

Re:Facebook is the new MySpace!

[antdude]

Just ban them from the Internet. :P

Re:(((them)))

[AvitarX]

This is actually the most interesting part to me.

I'd think that's in the realm that plenty of people would pay to opt out of some of the data ecosystem.

It'd be nice if they offered as an option $3/month or $24/year to use Facebook and not be sold, maybe $4/$30 since I imagine the revenue is actually higher in areas where there's more money.

I'd seriously consider it just to avoid all of the sponsored garbage in the feed.

Mark Zuckerberg's fortune tumbled by $16.8 billion

[schwit1]

As of Thursday’s close, he will slide to sixth place from third on the Bloomberg Billionaires Index. That's tough.

24%

[Zorro]

Facebook plunges more than 24 percent on revenue miss and projected slowdown.

https://www.cnbc.com/2018/07/25/facebook-earnings-q2-2018.html

But it is still 76% of what it was yesterday.

Irrational investors

[OneHundredAndTen]

As usual, investors acting irrationally and like a mob of sheep. No wonder we have market meltdowns every so often. FB remains of PoS though, so no sorrow here.

Re:Irrational investors

[zifn4b]

What we're seeing now is the market acting rationally in re-pricing a company with so little actual real value.

You must be new to investing. A lot of it is fueled by hype or as they say, speculation. Facebook IPO had hype in spades.

Re:(((them)))

[dromgodis]

I have the same sentiment, but after having discussed it with people I have come to believe that it is not likely to work even if the trust issue was somehow resolved.

Reason one is that it would require that close to all users pay for membership. The value as an advertising company is largely based on the sheer amount of eyeballs coupled with the massive amount of decent quality profiling information. If they lost that from 50% of their users, the ad value of the remaining 50% of the members would be less than 50%.

Reason two, which is for the tinfoils among us, is that if they want to use the platform for other ends than to make ad money, e.g. to drive a political agenda or superintelligence takeover, then they would still need the profiling as input and could use the ad/"news" as a manipulation stream.

"Shares were down as much as 10 percent"

[zifn4b]

It's actually worse than that now. Yahoo finance is showing an 18.23% drop right now

Re:(((them)))

[AvitarX]

I'm not quite sure that I follow that the value of a highly profiled view goes down as less of them are available.

There's likely a certain threshold that makes profiling harder because of difficulty building the graph if enough people opt out, but I would guess that number is higher than 50%.

There will always need to be a free option (or membership will dwindle over time), and the pay option can't be much more expensive than the revenue from the free option (or it creates an incentive to make the free option suck too much), but it seems viable to me.

If there's a reason it outright won't work on bet it's because there is dramatically different revenue per user based on country, and though $3/month seems reasonable to pay, if the users in higher gdp/per capital countries (about half I think) are essentially all of the revenue, that turns into $6/month, which is getting pricey for a distraction and a phone book IMO.

Re:(((them)))

[AvitarX]

And a quick googling makes me think that's correct.

Almost $10/month US.

The $3/month in Europe may be a good solution to privacy concerns there (compliance there seems to make it far less profitable).

https://www.statista.com/stati...

Like what EXACTLY?

[SuperKendall]

Tesla is already overtaken left and right by the established auto makers who have much better cars that they can actually deliver for a lower price

I've been to auto shows for years and have seen nothing close to what Tesla offers. Care to give an example so we can laugh and your poor taste in cars and complete lack of understanding of performance?

Like what are you gonna recommend, a Volt? HAH HAHA AHHA HAHAH AHA HA HAH HA HAHAH HAHAAHAH AHAH AHAH AHAH AHAHAHA!

It's the car makers themselves that are scrambling to build something even remotely close, while Tesla ships more and more cars and incrementally upgrades everything...

It's amazing to me on Slashdot that someone still does not grasp the fundamental moat Tesla has built with it's "car as software" philosophy.

If I were looking at cars now a Tesla is the only one that makes any sense to me.

Re:Like what EXACTLY?

[tsa]

Then we totally disagree. Americans just can't build cars, and Tesla is yet another example of that. The doors are flimsy, the dasboard is just not op to scratch for such expensive cars, you can't sit in the back because you can't get your feet under the chair in front of you and there's not enough headroom... Oh wow, 0-100 km/h in 3 seconds! Yeah that is important in daily driving.

Re:Like what EXACTLY?

[SuperKendall]

Performance is important but so is range.

The doors do not feel "flimsy" to me, though they are light - flimsy would be if they wobbled as you shut the door...

I would go on but you couldn't even produce a single counter-example, much less one that anyone is actually buying in volume.

If the car is so terrible why is the Model 3 getting such glowing reviews? It sure seems like I am not the only one that finds fit and finish decent if not spectacular.

I've had a lot of cars that made it way harder to sit in the back as well (note I do not OWN a model 3 myself, nor any Tesla - I've just been in them).

Re:Like what EXACTLY?

[tsa]

Nissan's Leaf is often seen here in Europe, as is the Renault Zoe. The Jaguar iPace is a much better car than anything Tesla has on offer. Then we have the (outdated I agree) BMW i3, the e-Golf, and Volkswagen will release a whole range of quite exciting electric vehicles next year. Dieselgate has had a positive effect on them.
And of course taste in cars also plays a role here.

The End Is Nigh, Zuckerbook!

[Rick Schumann]

Get your affairs in order, Zuckerbook, the Reaper is coming for your ass -- and nothing of value will have been lost.

Re:(((them)))

[dromgodis]

Thanks, that is an interesting graph. I find a couple of things remarkable compared to what I expected:

1. As you point out, the revenue of a US user is 3x that of a european.
2. At ~$100/year for an american pair of eyeballs, the numbers are much larger than I expected.
3. The revenue seems to keep growing exponentially.

Yeah, I agree. At $10/m, it is probably more attractive to most people to just to pay with your soul.

Re:(((them)))

[AvitarX]

It also appears that North American users are the only particularity profitable users.

Though I don't know where all of the revenue is coming from, I get 1.4 billion users * $6/user = 8.4 Billion, that leaves another 4-5 they're earning somewhere else.

2.1 billion shares $1.72 earnings/share is 3.6 billions total earnings.and implies their expenses are 13.2-3.6 = 9.6 billion / 1.4 billion users = $6.85/user (per quarter).

If we scale out the 25% of revenue that isn't Facebook users (and assume it's equally profitable pursuits (unlikely, this probably skews low)) it's still about $5.10/user in costs US is massively profitable, Europe quite profitable, and The rest are loss leaders.