Facebook rose on Monday in U.S. post-closing trading after publishing its third-quarter flash report on U.S. community giant, although it is conceivable that instead of quarterly numbers, internal documents and information leaked by ex-workers such as Frances Haugen are now the focus of investors.
Quarterly numbers were mixed, although Facebook exceeded analysts ‘expectations at the profit level, revenue fell short of consensus, and management expects revenue figures to be lower than analysts’ expectations for the fourth quarter as well.
|Figures for the third quarter of 2021 (USD million)|
|3Q 20||3Q 21 expected||3Q 21 facts||change (year / year)||fact / expected|
|gross margin level||81,0%||80,3%||80,1%||-0,9%||-0,2%|
|Source: Refinitive, Portfolio|
Key figures for the July-September quarter:
- Facebook achieved $ 29 billion in revenue, a 35 percent increase, with the markets expecting slightly higher $ 29.5 billion in revenue, according to the Refinitiv consensus.
- advertising revenues increased by 33 percent, the company has practically no other source of revenue besides advertising, other revenues account for only 3 percent
- the number of users increased further, the number of active users per day increased by 6 per cent year-on-year to 1.93 billion, the number of active users per month also increased by 6 per cent to 2.91 billion
- the number of employees is growing dynamically, by the end of September, Facebook already employed more than 68,000 people, 20 percent more than a year ago
- operating expenses increased more than revenue, so the level of operating profit decreased slightly, by 1 percentage point compared to the base period, to 36 percent
- At the operating profit level, Facebook posted a profit of $ 10.4 billion, a strong 30 percent increase, but fell short of analysts’ expectations as markets expected profits in excess of $ 11 billion.
- the tax liability increased significantly in the third quarter, but this was more due to the exceptionally low tax liability in the base period, a one-off, which then boosted earnings per share by $ 0.31
- due to the higher tax liability Facebook’s net profit increased by much less than revenue, by 17 percent compared to the same period last year, and earnings per share increased by 19 percent, the difference being due to treasury share purchases
- Facebook’s EPS kicked in at $ 3.22 in the July-September period of 2021, exceeding expectations, as the analyst consensus was $ 3.19.
In addition to the quarterly figures, Facebook’s massive treasury stock purchase program is also worth mentioning, with Facebook repurchasing nearly $ 14.4 billion worth of treasury shares in the third quarter.
Less than $ 8 billion remained from the previous treasury share purchase program, so the company has now added another $ 50 billion.
However, management commentary is not the most optimistic, management expects revenue of $ 31.5-34 billion for the fourth quarter, while analyst consensus is $ 34.8 billion. He mentions uncertainty about the outlook in the company’s quick report due to changes in Apple’s iOS operating system and the macroeconomic impact of the coronavirus epidemic. New data management options introduced by Apple this year could have a negative impact on the social networking advertising business, for example, Snap wrote its poor performance on its iOS account in last week’s flash report, causing shares to fall nearly 30 percent. Facebook’s chief financial officer also said the changes in iOS had the most significant negative impact in the quarter. And as a result of the relapse of the coronavirus epidemic the company also experienced a slowdown in its internet commerce business Sheryl Sandberg said, adding that the business is not growing as much as at the peak of the epidemic.
Operating costs could be in the $ 70-71 billion range instead of the previous $ 70-73 billion forecast, and capital investment could kick in at $ 19 billion, with the previously targeted band at $ 19-21 billion. Facebook spends on data centers, servers, networks and offices.
From the fourth quarter, there will be a big change, as Facebook will announce its results in a new segment structure: the “Apps” division will include Facebook, Messenger, WhatsApp and other service numbers, while “Reality Labs” will include virtual and augmented reality related consumer hardware, software, services.
This could already lay the foundation for the company’s long-term future, as Facebook has targeted a significant transformation from its current online advertising-based business model. The goal is to create a “matrix” where human interactions can take place in a 3D environment. It is expected that initially it will only take the money from the company due to the significant investment costs, in 2021 the VR segment could recover the company-level operating profit by $ 10 billion.
In closing trading, Facebook’s share price rose nearly 2 percent, this year, the paper is up 24 percent, making it slightly outperforming the U.S. stock market, with the Nasdaq and S&P 500 up 20-21 percent.
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