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Facebooks Earnings & Revenue Soars While Stock Prices Tumble 11%

By:
Barry Norman
Updated: Aug 25, 2015, 07:00 UTC

What happened to Facebook stock prices on Tuesday? Facebook shares tumbled 11% after the company reported better than expected earnings. Really, yes

Facebooks Earnings & Revenue Soars While Stock Prices Tumble 11%
Facebooks Earning & Revenue Soars While Stock Prices Tumble 11%
Facebooks Earning & Revenue Soars While Stock Prices Tumble 11%

What happened to Facebook stock prices on Tuesday? Facebook shares tumbled 11% after the company reported better than expected earnings. Really, yes really. The social network reported $3.2 billion in third-quarter revenue, an increase of 59%. Wall Street expected revenue of $3.1 billion, up from $2 billion a year ago. So what happened? Facebook had adjusted earnings per share of 43 cents, also surpassing analysts’ expectations. Excluding stock compensation and other expenses, analysts projected earnings per share of 40 cents. If I was a shareholder I would be ecstatic.  “This has been a good quarter for Facebook, and we have achieved strong results across the board,” Facebook CEO Mark Zuckerberg said during the call.

Facebook also showed strong growth in usage. Monthly active users grew to 1.35 billion, up from 1.32 billion in the second quarter. Daily active users grew to 864 million from 829 million in the second quarter. Facebook’s mobile advertising revenue continues to grow. This quarter, mobile ad revenue was up to 66% of the company’s total revenue. Last quarter it was 61%.

So what upset investors? Facebook also gave some forward guidance and their views of what’s to come. Markets did not like what they had to say.  Although the conference call was long and positive and showed a great 2015 and forward for the company, some comments stuck in the groin of investors.

“In light of our recent acquisitions, we are providing additional guidance this quarter including current quarter revenue and 2015 expenses. We expect full-year total GAP expenses including stock compensation; will grow 45% to 50% versus full-year 2013. This increase is primarily due to WhatsApp compensation based stock.”  CFO Wehner said that “In our expense outlook for 2015 ee believe we have substantial growth opportunities in front of us. We plan on 2015 being a significant investment year. Our likely costs will increase 55%+.

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In response to inquiries from JPMorgan, Wehner responded saying “We’re investing in long-term growth opportunities. Also growing talent base of company and investing in product side to invest in new areas like Oculus, ad tech initiatives and WhatsApp. We plan to support growth of core business, like video and Internet.org, so we’re investing across the board on that. In summary, the strength of the business today is putting us in a strong position to invest for future.”

Facebook shares had hit a high of $81.16 on Tuesday, more than double its $38 initial public offering price. But in after-hours trading they hovered around $73. Still a pretty good investment and a pretty good future.

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