Facebook, Inc. (Nasdaq: FB) reported third-quarter earnings after the bell on Wednesday, beating both revenue and earnings per share expectations. FB stock wavered in after-hours trading after initially adding more than 2 percent on the news.
The world’s largest social media company reported revenue of $10.32 billion, up 47 percent from the same quarter last year. Analysts expected revenue of $9.84 billion.
FB earnings per share came in at $1.59, up from 90 cents a year ago. Analysts were expecting EPS of $1.28.
[Read: The 10 Most Anticipated IPOs of 2017.]
As for Facebook’s absurdly high user count — in the second quarter, it had 2 billion monthly active users (MAUs) — that continued to grow at a healthy pace as well. MAUS grew 16 percent year-over-year from 1.79 billion to 2.07 billion.
RBC Capital Markets’ Mark Mahaney, a leading Wall Street technology analyst, was expecting MAU growth of 14 percent to 2.03 billion.
When will the train stop? With FB stock already up 57 percent this year, pausing to breathe, even after stellar third-quarter earnings, isn’t the worst thing in the world. After all, Facebook shares jumped 4.2 percent last Friday simply because three other familiar Silicon Valley names — Amazon.com ( AMZN), Microsoft Corp. ( MSFT) and Alphabet ( GOOG, GOOGL) — each respectively posted blowout quarters. Seeing as Facebook essentially enjoyed its post-earnings bump before it even reported, a more muted reaction seems justified.
Before Wednesday’s results, Facebook had warned of decelerating growth in ad impressions in the second half of 2017 as the company increasingly focuses on directing user engagement toward video, which is interrupted with fewer ads than the News Feed.
“Moving forward, we do believe pricing will play more of a role in spend growth than impression and click volume growth, per Facebook’s assertions on ad load,” says Andy Taylor, associate director of research at Merkle.
[See: 7 of the Best Stocks to Buy for 2017.]
Going forward. Looking to the future, it’s inevitable that MAU growth will continue to decelerate, as one can’t expect the population of the world to grow at Facebook’s desired growth rate.
Managing the pace of that deceleration, and increasing average revenue per user (ARPU) will remain vital, and the company has done a great job on that front. In the third quarter, FB managed to grow ARPU by 26 percent, from $4.01 to $5.07. That was an acceleration from Q2’s 24 percent ARPU increase. And the MAU growth? Down just 1 percentage point from Q2’s 17 percent.
Longer-term, shareholders are in good hands with Mark Zuckerberg, who thinks with long time horizons in mind, like Amazon’s Jeff Bezos or Berkshire’s ( BRK.A, BRK.B) Warren Buffett might do. Zuckerberg thinks the biggest near- and medium-term growth catalyst will be video, and much of that growth could come at the expense of cable companies and networks.
“The internet is rivaling television for advertising spending, and there are two clear leaders in that field — Alphabet and Facebook. Both have strong user bases and multiple platforms to publish on,” says Investing.com senior market analyst Clement Thibault.
“Since the internet is here to stay and Facebook has an enormous scale advantage — it will go as far as possible,” Thibault says.
Longer-term, monetizing Facebook Messenger and WhatsApp, two messaging apps that each have more than 1 billion users, will be more meaningful. FB stock owners also have Instagram in their back pocket.
Looking even further into the future, there could be unpredictable benefits Facebook reaps by developing artificial intelligence, exploring opportunities in voice and building out its personal assistant. Zuckerberg is bullish on virtual reality longer-term, and FB could have first-mover advantage with Oculus.
[See: Artificial Intelligence Stocks: 10 Companies Betting on AI.]
There’s a lot to be excited about as a Facebook shareholder, not just with respect to third-quarter earnings, but longer-term as well.
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Facebook, Inc. (FB) Stock: Q3 Earnings Crush Expectations originally appeared on usnews.com
