Facebook (FB) Earnings Not Bad, But Growth Continues Decelerating As Shares Plunge

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04:02:09 pm on July 26, 2012

Many were forecasting a miss from Facebook (FB) after the bell today, but the company surprised some skeptics by matching the analyst estimates of .12/share on an adjusted basis excluding compensation expenses related to the IPO.  However, this is a growth company with a lofty valuation, so just matching isn’t going to get it done in many cases.  After initially rising, the stock has reversed sharply and is now down another nearly 10% in after hours trading to a new all time low.  The stock was hit hard yesterday following Zynga’s poor earnings report.

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The company reported revenue of 1.18 billion which was a bit higher than analyst estimates of 1.15 and good for a 32% increase over the year ago quarter.  However, lets keep in mind that quarter over quarter revenue growth was 45% last quarter, so revenue growth and active user growth continue to decelerate and that’s what spooks investors.

As more of their users migrate to mobile devices, the challenge will be to monetize a smaller space.  The early results appear to be positive according the company.  Facebook now has independent ROI data from more than 60 advertising campaigns using a variety of third-party methodologies like panels and marketing mix models. The results show that 70% of campaigns resulted in a return on ad spend of 3x or better, and 49% of campaigns showed a return on ad spend of 5x or better.

“Our goal is to help every person stay connected and every product they use be a great social experience,” Mark Zuckerberg, Facebook founder and CEO, said in the earnings release. ”That’s why we’re so focused on investing in our priorities of mobile, platform and social ads to help people have these experiences with their friends.”

It should be mentioned that many aren’t real happy with the lack of details in the first report from the company, but perhaps much of that will be cleared up with the conference call set to begin in just a few minutes.

We’ll back later tonight or in the morning with a recap of the conference call.  It will be interesting to see if the company provides guidance.  I think there’s a good chance they won’t and that won’t help shares recover.

 

 

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