Facebook Issues $50 Billion Buyback Among Troubled Earnings Release

Social media beast Facebook reported mixed third quarter earnings after the close Monday. $FB guiding inline and warning on uncertainty from Apple IOS changes that saw $SNAP lose 26% last week. Launched $50 Billion Buyback program as transitions from social media company to a metaverse company in coming years.

Social media beast Facebook reported mixed third quarter earnings after the close Monday. $FB guiding inline and warning on uncertainty from Apple IOS changes that saw $SNAP lose 26% last week. Launched $50 Billion Buyback program as transitions from social media company to a metaverse company in coming years.

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Facebook Inc. (NASDAQ: $FB) Report Earnings After Close Monday

$3.22 Beat $3.17 EPS AND $29.01 Bil Beat $29.45 billion Revenue Forecast

Earnings release: after market; conference call: 5 p.m.

Facebook Q3 Earnings

    • EPS $3.22, EST. $3.17
    • REV. $29.01B, EST. $29.45B
    • Daily Active Users 1.93B, EST. 1.92B
    • Monthly Active Users 2.91B, EST. 2.92B
    • Announces $50B Boost in share Buyback Authorization
    • Forex swings provided a $259M boost to Q3 revenue.

 

Facebook, Inc. Common Stock NASDAQ: $FB

Market Reaction > $$336.48 ▲ 7.79 (+2.37%) After Hours

Highlights

ARPU

  • Facebook’s ARPU fell 1% Q/Q as it dealt with iOS-related ad targeting/measurement headwinds
  • (historically, ARPU has rarely dropped Q/Q outside of Q1). 
  • ARPU was still up 27% Y/Y.
  • ARPU rose Q/Q in Asia-Pac and “Rest of World,” but fell in North America and Europe.
  • Facebook’s North American ARPU is still more than 5x its global ARPU.

FB ARPU Q3 21

DAU

  • Daily active users (DAUs):1.93 billion expected by analysts, according to estimates from StreetAccount
  • Monthly active users (MAUs): 2.93 billion expected by analysts, according to estimates from StreetAccount
  • Average revenue per user (ARPU): $10.15 expected by analysts, according to estimates from StreetAccount

FB DAU Q3 21

Advertising

  • Ad revenue rose 33% Y/Y to $28.28B, missing a $28.96B consensus.
  • Ad impressions rose 9% Y/Y in Q3, while average price per ad rose 22%, with iOS headwinds and reopenings weighing some on the latter.
  • For comparison, impressions rose 6% and (with the help of easy comps) price per ad rose 47% in Q2.

 

Ecommerce

  • “Other” revenue, which among other things covers Oculus and Portal hardware sales, rose 195% to $734M, beating a $473M consensus.

Metaverse

Facebook announced new efforts to invest in areas outside of its core advertising business, including augmented and virtual reality.

  • Starting next quarter, Facebook says it will begin breaking out its VR/AR unit called Facebook Reality Labs (FRL) separately. The company said that investments in Facebook Reality Labs will reduce its overall operating profit by roughly $10 billion in 2021.
  • Revenue and operating profit for the company’s family of apps, including Facebook, Instagram, Messenger, WhatsApp and other services, will be reported separately from FRL, which includes AR and VR-reality related hardware, software and content.
  • Investments outside of advertising are proving critical to Facebook’s long-term growth.
  • Reports out Monday suggested that the tech giant is grappling with ways to retain younger users, which are a critical advertising demographic.

Buybacks

  • Facebook spent $14.37B on stock buybacks during the quarter.
  • With just $8B left on its buyback authorization at the end of Q3, the company says it has added another $50B to the authorization.

Apple Concerns

A main concern among investors came to fruition was that Apple’s (AAPL) privacy changes would negatively alter FB’s outlook. Since the recently-launched iOS 14.5 update allows users to block apps like FB from tracking user activity, creating a major hurdle for companies that rely on targeted ads to drive revenue.

Question about Facebook’s Reels plans, and one on Facebook’s efforts to deal with iOS privacy policy changes.

Wehner: We’re very pleased with Reels’ growth. Monetization is early — we’re just starting to roll out Reels ads on Instagram, and haven’t launched them on Facebook.

Sandberg: The iOS changes impact both targeting and measurement. For measurement, we believe we’re making progress towards dealing the under-reporting of conversions. Targeting is more of a long-term challenge. We have to rebuild our targeting systems to keep delivering relevant ads while adhering to the new rules. This is a multi-year effort.

Recall during the Q1 earnings conference  COO Sheryl Sandberg addressed the AAPL situation, stating that FB has done a “huge amount of work to prepare” and that the company is working with its customers to implement AAPL’s API and its own API to mitigate the impact of the iOS 14.5 changes.

Outlook

Facebook is guiding for 2022 GAAP costs/expenses of $91B-$97B. The midpoints of its 2021 and 2022 spending guidance ranges imply 33% Y/Y spending growth. 2021 capex guidance has been revised to ~$19B from $19B-$21B. At the same time, the company has set 2022 capex guidance of $29B-$34B.

“Our outlook reflects the significant uncertainty we face in the fourth quarter in light of continued headwinds from Apple’s iOS 14 changes, and macroeconomic and COVID-related factors,” the company said. The company also said that it expects revenues from non-ad products — like hardware — to be down year-over-year, due to high comparisons to last year’s heavy Oculus Quest 2 sales.

Source: Traderscommunity, Facebook,

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