E Facebook Gains Over Past Year Are Justified Through Revenues

Facebook (FB) reported first quarter earnings after the market closed on Wednesday May 5th, and on the surface the results were great with the company reporting earnings of $1.04 per share (beating estimates by $0.18) on revenue of $8B (beating estimates by $200M). The stock moved lower after it reported earnings, moving by 0.9%. Before I begin to parse through an income statement, balance sheet, or cash flow statement I like to check out how the segment revenues did and see if there was anything glaring. Below is a table on how the company did during the quarter compared to last year.

Segment Revenues (in millions)

Mar-16

Mar-17

Y/Y

Advertising

$5,201

$7,857

51.1%

Payments and other fees

$181

$175

-3.3%

Total Revenues

$5,382

$8,032

49.2%

Overall revenues were higher from this time last year by 49.2% on the overall increase of the advertising revenues which constitute roughly 97.8% of their revenue streams. In reality all the other revenue streams for this company don't matter because of how big of a percentage the advertising segment commands.

The outstanding news is that advertising revenues increased by 51.1% overall from last year to a total of $7.9B. This was all due in part to the more than five million businesses which are currently advertising with Facebook with more than a million of those business actually in emerging markets. The way that Facebook hooks these businesses is by allowing them to utilize the Pages platform to generate the ads and they continue to use it because it is very user friendly. The rest of the world and Asia Pacific showed the strongest advertising growth with 66% and 60% increases, respectively, which shows the strong advertising demand of the emerging markets. Meanwhile North America and Europe grew at a paltry 47% each.

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Disclaimer: This article is in no way a recommendation to buy or sell any stock mentioned. This article is meant to serve as a journal for myself as to the rationale of why I ...

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