July 26 - Facebook's first quarterly report as a publicly traded company earned it few friends among shareholders even as it posted double-digit user growth. Conway G. Gittens reports.
There were some things to like but more to dislike in Facebook's first quarterly report since its infamous stock debut. Earnings were in-line with forecasts and revenues came in ahead of the consensus, but margins, the rate of spending compared to sales, sunk to lows not seen since in at least two years, according to analysts' reports. The results prove that Facebook shares were over-hyped from the beginning, says Anupam Palit of GreenCrest Capital. SOUNDBITE: ANUPAM PALIT, SENIOR RESEARCH ANALYST, GREENCREST CAPITAL (ENGLISH) SAYING: "A lot of the kind of the classic valuation things that we look at were being thrown out the window because people felt that Facebook was somehow a special company; that they could grow at an enormous clip forever, very high double-digit rates, no company can do that. People felt that operating margins at 50 percent plus were sustainable - no company can do that. And what we are seeing this quarter is that the growth slowdown and the margin now being defensible is coming down as well. This company is coming back down to earth." But earth for Facebook isn't all that bad. Daily active users jumped 32 percent year-over-year, monthly average users rose 29 percent, and monthly mobile users surged 67 percent from a year ago. Facebook, however, still has to learn how to turn those eyeballs, especially the ones tied to mobile devices, into more cash, says Scott Kessler of S&P Capital IQ: SOUNDBITE: SCOTT KESSLER, SENIOR TECHNOLOGY ANALYST, S&P CAPITAL IQ (ENGLISH) SAYING: "If they get it right within the next year, I think they'll be okay. It's just things have been moving and changing so quickly when it comes to the mobile internet that there is a fair amount of opportunity, but things, obviously can be differentiated very, very fast. Meaning that they need to kind of figure out what their strategy is, pursue it and execute on it in a very effective fashion." And find a way to do that without having to dig too deep into the wallet. The ramp-up in spending last quarter overshadowing an 84 percent jump in revenues, causing the stock to lose more friends than it gained in a dramatic post-earnings sell-off. Conway Gittens, Reuters