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Facebook Q4 - Beat But Stock Down

Facebook reported its Q4 results last night, and they were in line with expectations. Revenue was up 25% compared to the same period last year. Earnings per share were $2.56 which was modestly above consensus at $2.53. In the absence of much to cheer about the stock price fell in after-hours trade, by 7%.

Wait what?! 7% is big fall. Keep in mind though that the stock has had a very good three month surge, to new all-time highs at $224 per share yesterday before the release of the results. Last night's correction was mostly due to the absence of any positive surprises. We live in a world of elevated expectations. Let's wait and see how they trade today in normal market hours.



We are not concerned by short-term share price moves, at all. Facebook is continuing to benefit from very strong trends in digital advertising and is still rolling out significant product enhancements such as Instagram Stories. The forthcoming US presidential election is going to help them rake in lots of advertising money. Thanks to Mike Bloomberg who is spending billions in online campaign ads, all of the other contenders are scrambling to raise even more donations from their supporters.

Facebook's chief financial officer David Wehner was sounding cautious on the post results earnings call last night. He said he expected the growth rate to decelerate further in the forthcoming quarter given "the maturity of our business" as well as "global privacy regulation and other ad targeting-related headwinds". He's probably just being conservative, like any good accountant.

We like this company and its management team, led by Mark Zuckerberg. Their platform assets are unrivalled, obviously - Facebook, Instagram, WhatsApp and more. They allow the world to communicate. They should buy Twitter, for goodness sake, to round out the portfolio.


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