Facebook makes big moolah, stock plummets anyway

FACEBOOK reported stellar results in the money department but its stock price plummeted anyway. What’s got investors spooked?

Facebook’s stock plummeted despite a good financial performance.

FACEBOOK grew its advertising revenue by 64 per cent in the third quarter, helped by a boost in mobile ads that are becoming an increasingly large chunk of the social networking giant’s overall advertising business.

The steady increase indicates that Facebook has succeeded in steering advertisers to its mobile platform at a time when most of its users are using Facebook on phones and tablets.

Investors were initially worried about the desktop web era-born company’s ability to succeed in mobile advertising, but those concerns are long gone.

Though Facebook’s results surpassed expectations, investors sent the company’s stock down sharply not long after the results came out, possibly spooked by comments during a conference call that 2015 will be a “significant” year for expenses. The company said it expects costs to grow by 55 per cent to 75 per cent next year as it ramps up investment in its work force, growing existing products and new areas such as WhatsApp, Oculus and video.

Facebook plans to spend big money next year.

This year, Facebook spent $22 billion in cash and stock to buy the messaging service WhatsApp and about $2 billion to buy the virtual reality company Oculus.

The Menlo Park, California-based company’s stock fell nearly 11 per cent in extended trading. Daniel Morgan, a portfolio manager at Synovus Trust Company, who focuses mostly on technology stocks, was surprised by the downturn.

“Unless there is something I am missing, I didn’t see anything in the report that would cause any concern,” he said, adding that the only thing he can think of is that the stock has done so well that expectations were extra high, and while Facebook did better than expected, they didn’t blow it out of the water.

“Maybe it’s just not enough to answer the Street’s desire to have unbelievable numbers,” he said. “It’s kind of a scratch your head kind of situation.”

The social media platform now has 1.35 billion users.

Advertising revenue at the company totalled $2.96 billion. Mobile ad revenue, a closely watched figure, was $1.95 billion, or 66 per cent of Facebook’s total advertising revenue for the quarter. That’s up from 62 per cent in the second quarter and 59 per cent in the first three months of the year. The 10-year-old company began offering mobile ads in 2012.

The company has been on a roll lately, and its stock hit an all-time high of $81.16 on Tuesday before the results came out. That’s more than double its initial public offering price of $38. Both the troubled IPO and the company’s lagging stock price seem like a distant memory. Still, Facebook has had to be vigilant in attracting new users, especially outside the U.S., and ensuring that existing members return day after day.

Facebook had 1.35 billion average monthly users as of Sept. 30, an increase of 14 per cent from a year earlier. Daily users totalled 864 million, up 19 per cent. Mobile monthly active users, meanwhile, were 1.12 billion, up 29 per cent from a year earlier.

Originally published as Facebook makes big moolah, stock plummets anyway