Facebook FB stock closed regular trading Thursday up 10.8% on the back of its fourth-quarter earnings and revenue beat. The question now is should investors think about buying shares of Facebook on the dip while they still can as the social media firm once again proved it is a digital advertising powerhouse?
Quick Q4 Overview
Facebook's quarterly revenues surged 30.4% to reach $16.914 billion, which beat our $16.37 billion Zacks Consensus Estimate. This did mark a slowdown from Q3’s 33% top-line expansion, which broke Facebook’s streak of 12 straight quarters of growth rates above 40%. But the law of large numbers eventually makes it hard for firms to post massive year over year gains on a percentage basis, just ask Amazon AMZN.
Meanwhile, the firm’s adjusted Q4 earnings skyrocketed 65% to touch $2.38 per share and easily topped our estimate that called for FB’s earnings to dip slightly to reach $2.17 a share. On top of that, Facebook’s revenues in the U.S. and Canada, which accounts for roughly 50% of total revenues, climbed 32% to $8.43 billion. And European monthly active users jumped 6 million sequentially to close at 381 million, which is a great sign after three straight quarters of sequential drops in the region that accounts for 25% of revenues.
Facebook’s global MAU total surged 9% from 2.13 billion in the prior-year quarter to reach 2.32 billion. Facebook’s less-saturated Asia-Pacific and the “Rest of World” markets drove this expansion. Plus, this only marked a small slowdown from Q3’s 10% climb, Q2’s 11% jump, and Q1’s 13% surge.
Outlook
Clearly, it seems like Mark Zuckerberg’s firm was able to silence some of its critics that worried the constant negativity would see users leave Facebook. Instead, the company’s MAUs continued to hum along at nearly a double-digit pace. In the end, Facebook, like Google GOOGL, will remain attractive to marketers as non-ad supported streaming platforms like Netflix NFLX, Amazon, and soon enough Disney DIS, Apple AAPL, and AT&T T make consumers harder and harder to reach.
Facebook, which is essentially an advertising company, has seen the importance of its mobile business expand exponentially over the years. In the fourth quarter, mobile advertising revenues represented approximately 93% of its ad business, up from approximately 89% in the year-ago period. This also highlights the growth of FB’s photo and video sharing platform Instagram, which is used almost exclusively as a mobile app.
Fittingly, Facebook said Wednesday that it will someday soon stop breaking out numbers for its namesake platform and instead report metrics for its "Family" of services, which includes WhatsApp, Instagram, and Facebook Messenger. “We believe these numbers better reflect the size of our community and the fact that many people are using more than one of our services,” CFO David Wehner said on the firm’s earnings call.
Overall, the company estimated that around 2.7 billion people —or roughly 35% of the world’s population—now use Facebook, Instagram, WhatsApp, or Messenger every month. Plus 2 billion people use at least one of Facebook’s “Family” of services every day.
The company has placed a great deal of faith and resources in its Stories features, and it seems to be working. Zuckerberg said on the earnings call that Instagram sees 500 million daily active users in its Stories feature alone.
Facebook has also poured money into its Craigslist-style Facebook Marketplace as it tries to compete with the likes of eBay EBAY and others. Maybe more importantly, the company has expanded its longer-form video product for Instagram called IGTV and spent heavily on its dedicated video tab called Facebook Watch, both of which could become even more important in a decentralized, increasingly cable-free world.
Fiscal 2019 & 2020 Estimates
Looking ahead, our current Zacks Consensus Estimate calls for Facebook’s fiscal Q1 revenues to jump 23.49% to reach $14.78 billion. Meanwhile, the company’s full-year 2019 revenues are projected to surge 22.22% above 2018’s $55.84 billion to reach $68.25 billion. Peeking ahead to 2020, Facebook’s revenues are projected to jump 20.93% above our fiscal 2019 projection to reach $82.53 billion.
Facebook’s earnings outlook doesn’t appear as strong in the near term as it spends billions of dollars on cybersecurity, platform cleanups, and growth-based initiatives. With that said, Facebook stock closed regular trading Thursday up nearly 11% at $166.69 a share. This still represented over a 24% downturn from its 52-week high of $218.62 per share and could set up a strong buying opportunity for those high on the social media giant that looks poised to remain an advertising and perhaps even an entrainment giant for years to come.
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