The shares of Facebook (NASDAQ 🙂 change course after a record high of $ 224.20 on January 29, just before the company reported record Q4 after closing. But instead of rising on the results, the shares fell more than 6% yesterday.
& # 39; The world's largest social media network reported earnings of $ 2.56 per share on sales of $ 21.08 billion, and was in agreement with consensus estimates. The company's fourth-quarter revenue of $ 21.1 billion, driven by ads on Instagram and in video, showed a healthy jump of 25% over the same period a year earlier.
But the devil was in the details. It was the slowest quarterly revenue growth for Facebook and the future guidelines were not strong enough at a time when the company is confronted with multiple antitrust probes and more restrictive privacy rules worldwide.
Facebook CFO David Wehner said about the profit call that the bulk of the impact of this headwind is still on the horizon, as the quarterly results do not yet reflect the effects of privacy rules such as the European General Data Protection Regulation and the California Consumer Privacy Act.
"We expect our total reported revenue growth in Q1 to slow down year on year by a low to average one-digit percentage point compared to our Q4 growth rate," Wehner said. Delays include the maturity of our company, as well as the increasing impact of global privacy regulations and other headwind-related headwinds. "
Buying on the dip?
Trading at $ 209.53 at the end of yesterday, Facebook shares fell by more than 6% of the heights before the profit announcement. The share has risen by more than 60% since the low of late 2018, while the company continued to add users to its family of apps amid probes and more calls for reforms to curb political manipulation, hate speech and radical propaganda.
Facebook Weekly Price Chart
The sharp reaction of the market to Facebook's profit is also a major dilemma confronting investors in the shares: is this dip in stock value a buying opportunity or is it showing a profit peak for the company because it is the daunting task of its make the platform more responsible?
Despite the negative reaction, the other details in the profit report showed that the company is still adding users to its platforms. Facebook said it had 2.89 billion monthly active users of its products around the world, after reaching 2.5 billion on the main network by December 31, which exceeded analysts' estimates of 2.49 billion.
That huge appeal makes Facebook & # 39; the world's largest social network and a medium that advertisers can't afford to ignore.
"Buy on weakness. 4Q showed a broad-based commitment that led to higher earnings and more profit," Morgan Stanley advised his clients in a post-profit note, with its price target remaining unchanged at $ 270 per share. "FB & # 39; s leading and growing engagement lays the foundation for further revenue and advertising growth."
Bottom Line
Facebook's earnings show a similar pattern to that seen by investors in the course of last year: strong sales growth along with a moderate impact of political and regulatory probes. We expect that trend to continue, so that Facebook shares can quickly regain their lost ground. In our opinion, the current dip offers a good access point for investors who were waiting on the sidelines.
