Facebook Earnings: The Big Picture is Good

3120
Facebook Inc
NASDAQ: FB

The Big Picture is Good for Facebook

Facebook (FB), the social media giant formed in 2004, released their 1st quarter earnings on Wednesday April 22th, 2015.  Facebook earnings were mixed for the first quarter with a beat on earnings per share and miss on revenue.  The company beat analysts’ profit per share expectations by 2 cents but missed on revenue expectations.  They reported 42 cents per share vs. 40 cents per share analyst estimates but revenue was $3.54 billion vs $3.56 billion expectations according to Thomson Reuters.  Shares dropped from a closing price of $84.65 to a low of $81.00 just after the earnings were released.  In afterhours trading shares had rebounded to just under $83 per share.

Foreign Currency Woes

As with my other companies with International exposure, Facebook blamed foreign currency and exchange fluctuations for the loss in revenue vs. expectations.   They said they would have made an additional $188 million, and beat revenue estimates, if it had not been for currency issues.

The Big Picture

The good news for long term investors is that 1st quarter revenue of $3.5 billion, thought slightly below expectations, was still 40% higher than 1st quarter revenue 2014 of $2.5 billion.  Additionally, daily active users increased 17% and mobile daily users increased 31% year over year.  In the last year Facebook shares have risen over 30%.  On April 22nd 2014 shares closed at 63.03 vs a close on Wednesday April 22ng 2015 of 84.65.

Technical Analysis

Facebook has been trading above the 200 moving average since July 2013.  The long bull trend has been noted by a few short term corrections with the pull back in March and April 2014 being the most obvious.  The stock traded on above average volume today leading into the earnings call.  I expect tomorrow will see a continued surge of volume as traders react to the news.

Buying the Dips

I see any dips in Facebook as a buying opportunity.  Facebook Earnings show it has good profit margins, good revenue, and is growing.  The company continues to dominate the social media sector.  Companies like Twitter are considered competition but they should be considered complementing social media platforms.  Twitter and Facebook each serve unique purposes in the social space.  Twitter being a better source of breaking news and live streaming events, while Facebook being a better tool for connecting with friends and family.  I expect Facebook will continue to grow through 2015 and I’d like to be on board as a shareholder.

 

Full Disclosure: I currently own no position in Facebook.

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