The shares of Facebook (Nasdaq: FB) declined on Thursday despite reporting spectacular second-quarter results, led by robust advertisement revenue growth.
In its earnings release, the company cautioned that its ad revenue would ‘decelerate significantly’ in the second half of the year. The unexpected caution sparked the selling of the company’s stock by investors and speculators. The stock closed at $358.32, down $14.96 or 4.01% from the prior close.
The California-based company, reported a second-quarter income of $29.077 billion, a growth of 56% from $18.687 billion in the similar period last year.
For the quarter ended June 30, 2021, Facebook reported a net income of $10.394 billion, or $3.61 per share. This is a growth of 101% from $5.178 billion, or $1.80 a share reflected in the quarter which ended June 30, 2020.
Analysts polled by Refinitiv had expected earnings of $3.03 per share on incomes of $27.89 billion for the reported quarter.
Commenting on the results, Facebook founder Mark Zuckerberg said, “We had a strong quarter as we continue to help businesses grow and people stay connected.”
Segment-wise,
- Advertising revenues improved 56% y-o-y to $28.580 billion. The reported figure reflects the steepest revenue growth in five years. In the first quarter, advertising revenues increased 48% year-on-year. The increase in the advertising revenue was led by a 47% y-o-y growth in the average price per advertisement and a 6% rise in the count of ads delivered. For the rest of 2021, the company anticipates ad revenue growth to be led primarily by an increase in advertising prices.
- Other revenues (includes sales of Oculus virtual reality headsets) were $497 million, up 36% from 2020, but missed the $685.50 million anticipated by analysts surveyed by StreetAccount.
Facebook reported average daily active users of 1.91 billion for June 2021, up 7% on a y-o-y basis. The reported figure was in line with StreetAccount analysts’ estimates.
Likewise, Facebook posted monthly active users (MAUs) of 2.90 billion at the end of June 30, 2021, an increase of 7% from last year. The reported figure was a notch lower than the 2.91 billion MAU forecast by StreetAccount analysts.
Furthermore, the average revenue per user (ARPU) was $10.12, surpassing the $9.66 figure expected by StreetAccount analysts.
The company also stated that family daily active people (DAP) was 2.76 billion, reflecting a growth of 12% from the comparable quarter of 2020. Similarly, family monthly active people (MAP) increased 12% y-o-y to 3.51 billion. The metric reflects the firm’s aggregate user base across its main platform, Messenger, Instagram, and WhatsApp.
For the second quarter, Facebook recorded a free cash flow of $8.51 billion, which missed the $9.08 billion consensus estimate by StreetAccount.
The company’s CFO, David Wehner, also issued an unimpressive third and four-quarter outlook by stating that the revenue growth rates will drop considerably in comparison to the first and second quarters of 2021. Analysts surveyed by Refinitiv forecast Q3 revenues of $28.22 billion, reflecting a 31% y-o-y growth.
The quarterly earnings beat and the cautious outlook are likely to keep the stock range-bound with a slight bullish bias.
The historical price chart shows that the stock has broken above the ascending triangle. Solid support exists at 340. Additionally, the stock is trading above its 50-day moving average, while the MACD indicator is ascending in the positive region. We are expecting the stock to restart its uptrend in the coming days.
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