Facebook Shares Soar After Better-Than-Expected Q1 Earnings Report
Facebook shares rebounded 9 percent Thursday to $175.20 after its Q1 earnings report showed revenue soared 49 percent year over year to $11.9 billion. The company’s $12 billion revenue was “well ahead of expectations driven by broad-based growth across products and regions,” Wedbush Securities analyst Michael Pachter emailed investors Tuesday. Facebook’s 2.19 billion total monthly average users was higher than Wedbush estimates of 2.18 billion, and the company’s daily average user count of 1.49 billion beat estimates of 1.44 billion, said Pachter.
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Wedbush anticipates minimal impact to Facebook from regulatory scrutiny and EU's General Data Protection Regulation. It expects Facebook to “weather the controversy” over the Cambridge Analytica data breach and continue to invest in initiatives that will generate substantial growth in years to come.
In addition to heightened security initiatives designed to limit misuse of member data, Pachter expects Facebook to make continued investments in delivering advertising for its Instagram, WhatsApp and Messenger platforms. Those investments should yield “significant returns in future years, especially in video,” said the analyst, and Facebook’s Oculus Rift virtual reality platform “has the potential to change the way that Facebook users communicate." Other social media platforms "failed to keep pace with Facebook, and its network effect and large user base will limit defections while providing an appealing target market for advertisers," he said.
On the Wednesday earnings call, CEO Mark Zuckerberg acknowledged the company “didn't do enough” to prevent its tools from being “used for harm” through “foreign interference in elections, fake news, hate speech, or app developers and data privacy.” Facebook is now “going through every part of our relationship with people and making sure we're taking a broad enough view of our responsibility -- not just to build tools, but to make sure those tools are used for good,” Zuckerberg said.
The company will “invest heavily in safety, security and privacy,” using new technology that restricts the data developers can access, the chief said. Artificial intelligence tools helped the company “detect and remove tens of thousands of fake accounts” ahead of elections in France, Germany, and Alabama last year, he said. Facebook is doubling its team working on security and content review to more than 20,000 by the end of 2018, he said, including content reviewers with specific language skills “to detect hate speech in places like Myanmar.”
It's working to “protect political discourse” by making ads more transparent, Zuckerberg said, and it’s requiring everyone running political and issue ads, or running a large page, to be “verified with a government ID." Advertising transparency tools will indicate who's running a political ad, whom they are targeting, how much they are paying, and what other messages they're sending to different people -- in time for the 2018 U.S. midterm elections and upcoming elections in countries including Mexico, Brazil, India and Pakistan, he said.
The company is early in its shift from “passive consumption to encouraging meaningful interactions,” Zuckerberg said, citing the interactive video feature Watch Party, which lets users view videos with friends. Some 200 million Facebook users are members of Facebook groups, he said, and as “membership in physical groups continues declining as it has for decades, we hope helping people connect on Facebook will help strengthen our society's social fabric.” With Oculus Go, the company has "big moments for virtual reality coming up,” he said. Also Thursday, the House Judiciary Committee debated perceived platform censorship against conservatives and Christians (see 1804260055).