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Social media beast Facebook reported better than expected second quarter earnings after the close Wednesday. $FB stock lost around 4% after guiding total revenue growth rates to decelerate significantly on a sequential basis. Sees itself transitioning from a social media company to a metaverse company in coming years.

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

 $1.88 EPS AND $16.50 billion Revenue Forecast

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

Facebook Q2 Earnings

  •  Q2 EPS $3.61 (est $3.02) - Q2 Revenue $29.08B (est $27.86B) 
  • Q2 Ad Revenue $28.58B (est $27.13B) 
  • Q2 Daily Active Users 1.91B (est 1.91B)
  • Continue To Expect Increased Ad Targeting Headwinds
  •  In Q3 And Q4 Expect year-over-year total revenue growth rates To decelerate significantly on a sequential basis.

 

Facebook, Inc. Common Stock NASDAQ: $FB

Market Reaction > $358.32 ▼ 14.96 (▼4.01%) July 29, 2001 close

Highlights

Advertising

  • Advertising revenue grew 56% year-over-year to $28.6 billion in Q2, driven by strength in verticals like online commerce and consumer packaged goods.
  • Ad revenue growth gained traction across all regions during Q2, facing an easy comparison with the year-ago quarter which was impacted the most by the pandemic.
  • The strongest growth of 86% came from Rest of World followed by Europe at 63%. Asia-Pacific and US & Canada grew 56% and 48% respectively.
  • Total number of ad impressions rose 6% and the average price per ad increased 47%.
  • For the rest of the year, Facebook expects advertising revenue growth to be driven by advertising price increases.
  • The company expects more ad targeting headwinds this year due to regulatory and platform changes, such as the iOS updates, which is anticipated to have more of an impact in the third quarter than the second quarter.

FB Earnings Q2 21

Ecommerce

  • The digital transformation of businesses brought on by the pandemic last year continues to benefit Facebook as the company’s tools help entrepreneurs and creators advertise their businesses through Pages, Profiles and Shops on Facebook and Instagram. here they can interact with customers through Groups, WhatsApp or Messenger.
  • Facebook is also making progress on payment systems.
  • WhatsApp is now available to everyone in Brazil and India and the company is adding new payments features like QR codes in Messenger in the US.
  • It is also making Facebook Pay available outside its apps, which means it will appear as a checkout option on the web.
  • Ecommerce is becoming a significant part of Facebook and one that will present new opportunities going forward.

Metaverse

  • Facebook mentioned the idea of a ‘metaverse’ on its quarterly conference call.
  • The company describes the metaverse as a “virtual environment where you can be present with people in digital spaces.” In other words, it is a virtual world where people can hang out, play games with friends or work.
  • The metaverse will be accessible through apps on phones and PCs as well as virtual and augmented reality devices, is expected to replace the mobile internet over time and create new experiences and economic opportunities
  •  Facebook said the metaverse would require significant investment over several years in terms of new protocols, devices, and software, among others.
  • The company also anticipates transitioning from a social media company to a metaverse company in the coming years.
  • One of the analysts on the call made a rough estimate of it being around $5 billion a year, which the company did not reject completely. 

 

Earnings Preview

Facebook report second quarter 2021 earnings projected EPS of $3.04 on projected revenueof $27.84 billio Last quarter FB crushed the EPS consensus estimate by $0.98 and the revenue projection by $2.6 bln.

Key Metrics in Q1

  • Boosted by a combination of higher average ad prices (+30%) and ad impression growth (+12%) FB's top-line soared by 48% to $26.2 bln.
  • Verticals retail and eCommerce continued to perform well, especially in the small and medium-sized business space.
  • In Q2, FB expects yr/yr total revenue growth to remain stable or to modestly improve relative to Q1.
  • This essentially equates to upside guidance because the current forecast calls for 35% yr/yr growth in Q2 and FB just generated 48% growth in Q1.

Apple Concerns

A main concern among investors 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.

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.

 

Facebook, Inc. Common Stock NASDAQ: $FB

Market Summary Q1 > 329.51 ▲ 22.41 (7.30%) · April 29, 2001

Highlights

Backed by a resurgence in SMB advertising spending, FB delivered results that met or surpassed the expectations of even the most bullish of investors.

Source: Traderscommunity, Facebook, AlphaStreet

From The Traders Community News Desk

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