Facebook Beats 1Q17 View, MAU Inches Towards 2 Billion

Facebook Beats 1Q17 View, MAU Inches Towards 2 Billion

The stock of social media platform provider Facebook, Inc. (NASDAQ: FB) fell about 3% to close at $150.24 last week, following a warning from the company that expenses would increase “meaningfully” in fiscal 2017 and ‘ad load’ – the volume of ads displayed to users – will not be a prominent factor in revenue growth this year. However, considering the fiscal 2017 first-quarter results and rise in monthly active users, we expect the stock to gain the lost ground.

Aided by a 51% rise in advertising revenue, the Menlo Park, California-based company reported total revenues of $8.03 billion, up from $5.38 billion in the similar quarter of 2016.

During the first-quarter of 2017, the net income increased 76% to $3.06 billion, from $1.74 billion in the first-quarter of 2016. On a per share basis, earnings rose to $1.04 per share in 1Q17, from $0.60 in 1Q16. The operating margin increased to 41% in the recent quarter, from 37% in the same period last year. Analysts polled by Yahoo Finance had anticipated earnings of $0.87 per share on revenues of $7.83 billion.

Facebook also stated that it would no longer exclude stock-based compensation in its earnings. Thus, there were no non-GAAP earnings in its quarterly earnings report. Notably, Alphabet, the parent company of Google, also resorted to a similar accounting procedure in the quarter ended in March. However, Alphabet had forewarned investors about the change in accounting method in January, whereas Facebook did not. This led to a decline in the share price last week.

Daily active users were 1.28 billion at the end of the March quarter, up 18% on y-o-y basis. Monthly active users (MAU) increased 17% y-o-y to 1.94 billion in 1Q17. During the quarter ended March 2016, Facebook earned 85% of advertising revenue from mobile advertisements, up from about 82% in the first-quarter of 2016. Average revenue per user increased to $4.23, against $4.17 anticipated by analysts at StreetAccount.

The company ended first-quarter 2017 with Cash and cash equivalents of $32.31 billion. Free cash flow increased to $3.8 billion during the first-quarter.

The stock has broken the descending trend line and is consolidating at 149 levels. The MACD indicator is rising towards the zero line. This indicates a buildup of buying pressure on the stock. So, the stock can be expected to go up and reach the next major resistance at 152.

Facebook - Technical Analysis - 9th May 2017

A high or above option can be bought with an expectation of a rally in the stock of Facebook. The contract can be picked when the stock trades near $149 in the NASDAQ. Additionally, a binary trader can select May 17th or a nearby date for the option expiry.

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