Facebook Jumps as Revenue Beats In Q1; Sees Signs of Stability in Ad Revenue

Apr 29, 2020

Back Stock Market

By Yasin Ebrahim

Facebook (NASDAQ:FB) rallied in after-hours trade on Wednesday after the social media giant reported first-quarter earnings that fell short, but revenue topped expectation amid higher-than-expected user growth. The company said it had seen signs its ad-revenue growth was stabilizing following Covid-19 related weakness last month.

"After the initial steep decrease in advertising revenue in March, we have seen signs of stability reflected in the first three weeks of April, where advertising revenue has been approximately flat compared to the same period a year ago, down from the 17% year-over-year growth in the first quarter of 2020," Facebook said.

Shares gained 8% in postmarket trading.

Facebook announced earnings per share of $1.71 on revenue of $17.74 billion. Analysts polled by anticipated EPS of $1.75 on revenue of $17.42 billion. That compared with EPS of $1.89 on revenue of $15.08 billion in the same period a year before. Facebook had reported EPS of $2.56 on revenue of $21.08 billion in the previous quarter.

Daily active users rose 11% to 1.73 billion, above expectations for a rise to 1.7 billion and monthly active users rose 10% to 2.6 billion, above the 2.55 billion expected.

Analysts are expecting EPS of $1.48 and revenue of $16.93 billion in the upcoming quarter.

The social media company also pledged to continue investing on its platform to beef up security, a move that would likely keep a lid on margins.

"We plan to continue to invest in product development and to recruit technical talent. In addition, we have committed over $300 million to date in investments to help our broader community during the crisis, which will have an impact on our financial performance this year. As a result, we expect total expenses in 2020 to be between $52-56 billion, down from the prior range of $54-59 billion," the company said.

"While this reflects a moderate reduction in the planned growth rate of total expenses, our overall expense growth in the face of expected revenue weakness will have a negative impact on 2020 operating margins," it added.

"There is a strong evidence in these earning numbers that FB ad revenues aren’t getting a big hit from the Covid-19 shock initially. If that trend persists and the company is able to materially capitalize on the increased user-engagement, its stock is well-positioned to better perform than its peers," analysts Haris Anwar said.

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