Image source:
What's going on?
Damn. For the sixth straight quarter Facebook made more revenue and profit than Wall Street expected (tweet this) and its stock price hit a new record high!
What does this mean?
Facebooks revenue jumped more than 50% versus a year ago, which is a huge growth rate for a company of its size (its revenue topped $8 billion last quarter, largely due to a continued shift to mobile advertising). The number of Facebook users also grew more than expected, up about 18% versus a year ago to 1.23 billion daily active users (think about that for a minute). Dampening the party, Facebook was ordered to pay $500 million in a lawsuit over the Oculus Rift (its virtual reality device) but thats immaterial to Facebooks overall finances.
Why should I care?
For the stock: Investors are wary about growth for 2017, but Wednesdays results are helping them stay optimistic.
The strong results are particularly interesting given the companys prior warning that revenue growth would slow in 2017 as it has, essentially, already crammed as much advertising onto the Facebook platform as it can without ruining the user experience. The extent to which a slowdown in revenue happens, or whether its offset by, say, monetization of WhatsApp and Instagram, will be an ongoing focus for investors this year.
The bigger picture: Facebooks continued growth could bode well for Snap Inc.
According to various media outlets, Snapchat owner Snap Inc. is aiming to become a publicly traded company in March (i.e. complete an IPO). Snapchat, with its entrenched following of young users, will seem to many investors like the second coming of Facebook justifiably or not and therefore Facebooks success could support demand for Snaps stock.
Originally posted as part of the Finimize daily email.
The top 2 financial news stories in 3 minutes. Join over one million Finimizers
