Facebook shares dIpped 3.5% to just over $30 a share last night after reporting fourth quarter earnings after the close of play in the US. The social network site’s shares have risen from a low of $18 in August last year as the company has focused its efforts on boosting ad revenues but it is still off the May 2012 $38 IPO price.
On most metrics the results were very solid, beating most analyst estimates but the sell off was triggered by CEO Mark Zuckerberg’s intention to aggressively boost hiring during this year to facilitate product development thereby increasing costs significantly. Expenses are expected to increase by 50% during 2013 to expedite products such as the recently announced Graph Search.
Facebook now has 1.1 billion active users, a 25% increase versus 2011.
The company reported earnings of $64 million, 3 cents a share, compared with earnings of $205 million or 14 cents a share for quarter four 2011, with revenue rising ahead of expectations by 41% year on year to $1.59 billion.Adjusted net income was $426 million or 17 cents a share, compared with expectations of 15 cents a share but in line with the “whisper” number.
Full year 2012 earnings were 53 cents a share on $5.09 billion in revenue, compared with estimates of 52 cents earnings a share on $5.03 billion in revenue in 2011.
Zuckerberg’s previous announcements that he planned to focus growth on mobile advertising seems to be paying off, though maybe not at the speed at which some company watchers would like. Mobile ad sales more than doubled to $306m compared with the third quarter, representing 23 per cent of overall ad revenues, compared with 14% in the last quarter. Active mobile users exceeded its desktop daily users for the first time in the fourth quarter of 2012.
After such a strong recent run up in Facebook shares following the disastrous sell off in the summer, expectations were always going to be revved up with these results. Though growth looks impressive, the mass hiring programme similar to the early days of Google looks to be the focus for now. The disapointment of the Graph Search announcement earlier in the month has also tempered sentiment. A great contrarian trade for those buying in in the dark days of August that’s for sure, when many had began to write the company off after the botched IPO on Nasdaq. Not such a great trade now perhaps
Contrarian Investor UK