Facebook delivers on earnings but Netflix stumbles

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Plenty of action in the tech space yesterday, with Apple announcing the new iPad Mini, the 7 inch tablet. Though its premium price worried some investors, sending the shares down over 3% to $613 in regular hours trading.

Netflix, the online movie company’s shares dropped 15% to $58 in after hours trading after reporting  weak Q3 results. The shares hit $300 in 2011 but have fallen heavily over the last 18 months over fears about subscriber growth and an ill timed 60% subscription price increase sent users to the exits. A plan to spin off its DVD rental business was also aborted.

Earnings came in at $7.7 million, or 13 cents a share, compared with $62.5 million, or $1.16 a share,  in the same period in 2011. Earnings were hit as margins dropped from 35% to 27% on increased subscriber acquisition costs and international expansion. Revenue rose to $905 million, a 10% jump which was in line with expectations. 

The company now had 25 million U.S. subscribers on its online video service, an increase of 1.2 million from the previous quarter, marginally down on expectations.  It is also ploughing ahead with international expansion, adding 690,000 subscribers making a total of 4.3 million in its international business. Netflix recently launched its service in Scandinavia after successfully launching in the UK in 2011.  

Better news at last from Facebook after its third quarter results drove its shares 13% higher in after hours trading to $22.

The company delivered a loss of $59 million, or 2 cents a share, compared with a profit of $227 million or 10 cents a share in the year-earlier period as a result of share compensation awards. Adjusted earnings came in at 12 cents a share compared with expectations of 11 cents. Revenue climbed to $1.26 billion from $954 million, a growth of 32% versus the previous quarter and in line with estimates. Ad revenues increased 36% with mobile accounting for 14% of the total coming in at $150 milion, and mobile monthly active users increased 61% to 604 million from the year-ago period.

The company finally passed the 1 billion subscriber market with 1.01 billion monthly active users, up 26% from the year-earlier period.

CEO, Mark Zuckerberg seems to have silenced his critics for now with the positive news on mobile advertising  revenue and the potential for future growth in new ad formats.  The shares have now bounced significantly since the low of $17 or so in early September but with an eye wateringly high price/earnings of 45 for 2012 and more share holder locks in’s expiring, Zuckerberg and his team still have much to do to move the shares back to their $38 IPO price.

Contrarian Investor UK

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