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Want proof that the market is a fickle creature? Despite reporting increased user numbers, income and revenue, Facebook’s stock still fell slightly in after-hours trading.
The social networking giant’s Q1 results were positive and beat Wall Street’s estimates. Revenue for the quarter totaled US$1.46-billion, an increase of 38%, compared with US$1.06-billion in the first quarter of 2012. Given that people have been worried about how well Facebook makes use of its advertising products, the news that ad revenue was up 43% from a year ago should’ve buoyed stockholders too.
Net income meanwhile was US$219-million, up seven percent from US$205-million for the same period a year ago.
The results should also have allayed any fears that Facebook is shedding users. Daily active users were 665-million on average for March 2013, an increase of 26% year-over-year while monthly active users were 1.11-billion as of 31 March 2013, an increase of 23% year-over-year.
There was nothing particularly evasive in Facebook CEO and founder Mark Zuckerberg’s statement either. “We’ve made a lot of progress in the first few months of the year,” he said. “We have seen strong growth and engagement across our community and launched several exciting products.”
So why the fall in stock price?
Well the fact that the company’s earnings per share stayed flat at US$0.12 per share probably didn’t help matters. Neither did news that its Chief Accounting Officer David Spillane was leaving the company. Spillane has been at the company since 2008 and oversaw its IPO.
It’s also likely that those watching the markets are aware that much of Facebook’s user growth is in emerging market countries, where ad spend tends to be lower than in more mature markets. Adding to all of that is the fact that costs and expenses were US$1.08-billion, an increase of 60% from the first quarter of 2012, driven primarily by infrastructure expense and increased headcount.
It’s worth bearing in mind however that the market’s been cynical towards Facebook from the get go. There’s no tangible product that investors can hedge their bets on, as is the case with hardware companies such as Apple. That means it can only really be measured by its ability to sell advertising. And it doesn’t do that nearly as well as Google. Guess which one people would rather hedge their bets on?