Facebook (FB:NYSE) reported second-quarter earnings this
evening, beating the Street on both the top and bottom
lines. The underlying metrics were strong and our thesis
The shares rallied nearly 3% today going into the print, and
they are up 27% from the April 28 lows and 31% year to date,
so to be up as much as 4% in extended trading is impressive.
But it's understandable because the story continues to get
better -- total mobile exposure is improving, monetization
is clearly happening, and the social network has yet to
monetize its Instagram, WhatsApp and Oculus acquisitions, so
there are future catalysts.
Facebook earned $0.42 per share, easily beating the $0.32
consensus. Revenue rose 61% to $2.91 billion vs. the $2.81
billion consensus. Advertising revenue was $2.68 billion, up
67% from a year earlier, or 65% on a constant-currency
basis. This beats the $2.58 billion expectation and shows a
15% improvement over the year-ago quarter. Mobile
advertising revenue is now 62% of total, up from 41% a year
earlier. The company now has 1.5 million active advertisers
with growth from new and existing ad customers, and that is
across the board in various industries. It's clear that the
strategies for personalized marketing and technology
investments are bearing fruit and gaining scale advantages.
Daily Active Users (DAUs) totaled 829 million on average, up
19% from last year and 3.4% the previous quarter. This is
slightly better than the expectation of 827 million. Mobile
DAUs rose 39% year over year and 7.4% quarter over quarter.
Monthly Active Users (MAUs) totaled 1.32 billion, a 14%
increase from a year ago and 3.4% better than the prior
quarter. This is slightly below some of the aggressive 1.4
to 1.5 billion analyst figures but, again, it still
represents strong double-digit growth. Mobile MAUs improved
31% y/y and 6.2% q/q.
Payments and other fees were $234 million, up 9% from the
same period last year, beating the $225 million consensus.
Capital expenditures were $469 million, a touch less than
the $478 million expected. Non-GAAP costs and expenses were
$1.2 billion, up 18% y/y and ahead of the $800 million
expectation. Operating margin came in at 59% vs. 44% y/y,
slightly below the 60% to 61% expectation as expenses and
investments continue to grow. Cash and marketable securities
stand just shy of $14 billion, and free cash flow was $872
Facebook shares are not cheap at 49x the price-to-earnings
multiple on 2014 estimates and 39x on 2015's, but having
just put up 60% revenue growth and strong mobile
monetization with future catalysts in other parts of the
business that are in their early stages (Instagram, WhatsApp
and Oculus) the company continues to be a standout in growth
Jim Cramer, Stephanie Link, and TheStreet Research Team
DISCLOSURE: At the time of publication, Action Alerts PLUS
was long FB.
We like the company's plans to shift toward more energy exposure.
Nonetheless, we continue to like this story and the aerospace cycle.
We raised a little cash this week, feeling it prudent given the global uncertainties.
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