Product Jungle: FB: Facebook Earnings: Some Key Concerns Remain Desipte Solid Revenue Growth

Thursday, January 31, 2013

FB: Facebook Earnings: Some Key Concerns Remain Desipte Solid Revenue Growth

Facebook Earnings: Some Key Concerns Remain Desipte Solid Revenue Growth
by Dividend Pros

I took a lot of flak from Seeking Alpha readers earlier this month for suggesting that the rally in Facebook (FB) stock might be about to end due to valuation concerns. It made me realize that Facebook is a company that is very close to the hearts of many retail investors. On Wednesday evening, Facebook bulls were out waiting for the earnings release to give a fresh boost to the stock which has rallied more than 50% in the last four months. And in terms of the headline numbers, the bulls were not disappointed: Facebook reported a Q4 EPS of $0.17, in line with the Whisper Number but beating the street consensus by two cents. The revenue grew 40% Y/Y to $1.59B, also beating the street consensus of $1.52B. Revenue from advertising represented 84% of this total revenue and represented a Y/Y increase of 43% after adjusting for foreign exchange changes. However, expenses also grew 82% Y/Y to $1.06B as the employee headcount increased 44%. Later on in the earnings conference call, Facebook management was quite satisfied with the company's performance and excited about future growth prospects. CEO Mark Zuckerberg claimed that Facebook had delivered robust growth during 2012 and had established a firm platform from which to grow on in 2013 and beyond. However after hours trading gave the impression that the investors were not entirely happy with the current narrative; maybe they were expecting a bit more. In this article, I will go over the key performance metrics from the earnings release and explain some of the concerns the investors might have. read more »