Social network Facebook Inc just posted adjusted net earnings per share (backing out regulatory fines) of $1.99 on revenue up 32% on an FX-adjusted basis to $16.6 billion for the quarter ending June 30, 2019. It completed $1.1 billion in share buybacks over the quarter and finished with $48.6 billion cash on hand.
The company now has 2.14 billion daily active users across its popular platforms including Facebook (blue), Instagram, WhatsApp and Messenger, with both daily and monthly active users growing by 8% on the prior corresponding quarter. It estimates 2.7 billion people use one of its services every month.
It's also still growing average revenue per user (ARPU) around the world which puts it in a sweet spot of user and ARPU growth on the back of its widening network effects.
The group will take a $5 billion fine from the Federal Trade Commission (FTC) over privacy failures and has agreed a process to regularly certify its compliance with privacy rules to the FTC.
Largely due to the compliance failings costs have blown out quicker than revenues to $12.2 billion for the quarter, compared to $7.4 billion in the comparable quarter.
Facebook and other leading tech companies will also soon have to front a Department of Justice anti-trust investigation opened in July 2019.
The company still earns more than 90% of its revenue from advertising and CEO Mark Zuckerberg flagged on today's earnings call that he views a multi-year move into the payments space as a growth area for Facebook via, inter alia, WhatsApp for small business, Instagram checkout, Facebook Marketplace or Facebook Pay on the Messenger platform.
Zuckerberg is not for backing down on his plans for a Libra cryptocurrency either, which he suggested could help reduce payment costs and fees for users particularly in emerging markets. However, it's no secret the plan faces opposition from central bankers and governments for now.
Other plans such as Facebook Dating appear to have taken a back seat for now, probably due to the roasting the company has taken over its handling of user privacy.
Analysts seemed to spend a lot of the earnings call questioning why its CFO, David Wehner, is forecasting decelerating sequential revenue growth over the second half of 2019, including during its its bumper final Christmas quarter.
However, given it just posted 32% FX-adjusted revenue growth and is cycling off tough comps for the second half of 2018 it seems fanciful to demand accelerating growth for a company its size.
Forecasting is also trickier for Facebook than other companies with no contracted revenue as it sells ads on an auction basis with demand for different products uncertain and partly dependent on the unknown macro-environment.
Whatever numbers it posts over the second half of 2019 I still expect the stock will offer good returns to investors over the long term.
