Facebook (FB) will report second quarter results this afternoon. Zuckerberg will host a conference call at 17:00.
Analysts expect Q2 EPS up 7.5% to $1.87 with revenue up 25% to $16.49bln.
FB has beaten top line estimates two quarters in a row due to increased ad load on Instagram and traction with stories on Instagram and Facebook.
Still, first quarter revenue grew 26%, the slowest on record.
Last quarter, FB put aside $3 bln for a settlement with the FTC. This morning, FB confirmed a record $5 bln FTC settlement. The DOJ announced a broad investigation into tech dominance and antitrust. Facebook is still in the cross hairs of regulators.
Last quarter, Facebook lowered FY19 op-ex guidance to +37-45% from +40-50% excluding the FTC settlement.
Earnings are expected to grow 3% this year with revenue up 24% (on top of 37% growth in 2018).
TECHS:
With a $575 market cap, the stock trades at 26x FY19 EPS estimates or 21x FY20 EPS estimates, a small premium to Google (GGOG/L), which has more digital advertising market share but is growing at a slower rate.
RESULTS:
👍🏾👍🏾👍🏾Facebook beats by $0.12, beats on revs👍🏾👍🏾👍🏾
Reports Q2 (Jun) earnings of $1.99 per share, excluding $2.0 bln legal expense related to the FTC settlement and a $1.1 billion income tax expense due to the developments in Altera Corp. v. Commissioner, $0.12 better than the S&P Capital IQ Consensus of $1.87 (GAAP EPS $0.91); revenues rose 27.6% year/year to $16.89 bln vs the $16.49 bln S&P Capital IQ Consensus. Adj. operating margin -500 bps to 39%, vs. 37.6% ests.
"We had a strong quarter and our business and community continue to grow," said Mark Zuckerberg, Facebook founder and CEO. "We are investing in building stronger privacy protections for everyone and on delivering new experiences for the people who use our services."
Daily active users (DAUs) -- DAUs were 1.59 billion on average for June 2019, an increase of 8% year-over-year.
Monthly active users (MAUs) -- MAUs were 2.41 billion as of June 30, 2019, an increase of 8% year-over-year.
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Facebook (FB -2.6%) hit a 52-week high this morning after the company reported strong second quarter results last night. The stock has since come under pressure as management's guarded outlook is clouded by continued regulatory uncertainty.
After missing on the top line twice last year, the social media giant has returned to form, beating revenue estimates for the third consecutive quarter.
Revenue growth accelerated modestly (to 27.6%) in the second quarter, despite guidance for deceleration.
Renewed top line exuberance is largely driven by Instagram, which has taken the torch from Facebook in terms of social media popularity. The company has gained traction with advertisements on stories on both Facebook and Instagram.
Facebook reiterated its outlook for a deceleration of revenue growth in coming quarters, adding that it will be more pronounced in the fourth quarter and fiscal 2020, citing ad targeting headwinds and tough comps.
Management noted that its focus on privacy, regulatory restrictions, and platform changes all present revenue headwinds. The company also noted that advertisements served with stories and in emerging markets (where the growth is coming from) carry a lower price tag. Ad impression increased 33% in the second quarter while ad prices fell 4%. Revenue growth was already expected to slow going forward; management seems to be keeping expectations in check after the company posted revenue growth acceleration in the second quarter.
Facebook will be forced to take privacy very seriously going forward. In its record $5 bln settlement with the FTC over violating the consent decree from 2012, the company agreed to build privacy into every product, with stricter compliance measures (signed off on by Mark Zuckerberg) and a new independent privacy committee on the Board of Directors.
The company also disclosed a separate antitrust investigation from the FTC. This confirms what we already knew after the DOJ's announcement on Tuesday. Regulatory scrutiny won't be going away anytime soon.
Facebook is increasingly focused on commerce and payments. The company also said that it is willing to work with regulators on its digital currency Libra, which got very stiff pushback from US officials last week.
The company still has tons of strategic monetization levers to pull over the long term.
Despite the top line warning, investors are looking forward to earnings growth acceleration next year.
Management did not provide any expense guidance for next year, but earnings are currently expected to grow 20% next year after growing just 5% this year. Facebook trades at 21x EPS estimates for next year, right in-line with Alphabet (GOOG/L), which will report this afternoon.
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