Facebook Reports Strong Numbers Across The Board, Second Half Caution Reiterated

Last night, after the close off regular market trading, Facebook reported a stellar set of numbers for its June quarter.

The company said it earned $1.32 per share on revenues of $9.32 billion for the three months ended in June. Wall Street analysts were expecting the company to report earnings of $1.13 per share on revenues of $9.2 billion.

The company's metrics were strong across the board with good market share gains, Instagram firing on all cylinders and monetization increasing from that platform, and increasing contributions to the top and bottom line from video related advertisement.

Check out the following statistics on Facebook user metrics:

Facebook collectively has over 2 billion users;

Instagram alone has over 700 million users;

Facebook Messenger and WhatsApp each have over a billion users.

Pretty impressive for something that was started as a hook-up site, no?

The numbers (Wall Street estimates) for the back half of 2017 should also be coming up as the company stated on their conference call that their CapEx would now come in at the lower end of the guided range between $7 billion and $7.5 billion and more importantly GAAP expense growth was also lowered to 40% and 45% from the earlier range of 40% to 50%.

On the flip side, management stated that they will continue to hire aggressively and that headcount would accelerate in 2017, and that ad revenue growth rates would also decline as the year goes on. Being conservative is not a bad thing.

Net-net, look for earnings numbers to come up a bit for 2017 and beyond.

Regarding monetization of Messenger and WhatsApp, Zuckerberg said, "I want to see us move a little faster here but I'm confident that we're going to get this right over the long term."

The company's total revenues were up just under 45% in the June quarter, which is outstanding for a company of this size.

However, the company's growth in mobile was truly astounding. Mobile ad revenues grew to just a shade under $8 billion and accounted for 87% of the company's advertising revenue of $9.16 billion in the June quarter.

For about a year Facebook has been warning that ad growth will slow however thus far that has not happened.

Although, CFO David Wehner once again reiterated the company's caution: We continue to expect that ad load will be a significant factor in the remainder of 2017, and that starts in Q3."

The second half will be interesting, given the repeated words of caution from management, and I wonder how Wall Street will react this morning when they raise their price targets and ratings.

Will it be the usual rah-rah given the stellar earnings report for June, or will at least a couple of sell-siders heed the words of caution?

Having said that, I was wrong on my caution going into the Facebook earnings event, however, as I tell mysubscribers/LPs, "You can't be long every single stock that is going up and short every one that is going down. That is for fantasyland/paper trading."

Congratulations if you were long Facebook going into the results last night.

It's still early but shares of Facebook are currently at $172.11/$172.29 on minimal volume in very early pre-market trading activity.

(No positions)

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