Summary
In the most recent quarterly earning’s report, Facebook reported $44 billion in total earnings, more than doubling the revenue the firm reported two years ago. This is particularly interesting given the company’s deteriorating public imagine and its association with the Cambridge Analytica scandal in recent months. In contrast, both Alphabet and Apple reported roughly 30% to 40% increase in sales revenue, and it has become apparent that Facebook was the clear winner, and an apparent “cash machine” in this quarter of the year. As a result, Facebook shares skyrocketed on Wednesday, and the company just proved once again that the recent problems have not discouraged investors from keeping their faith and money in Facebook. Analysts seem to agree with this assessment. Aaron Kessler, an analyst at Raymond James, concludes after thorough studies that the recent news related to Cambridge Analytica has almost no impacts on the future prospect of the company. This is also a clear indication that Facebook remains popular among businesses, which are reluctant to abandon Facebook’s 2.2 billion monthly active users.
Facebook’s cash hoard has more than doubled in two years
Facebook is a cash machine.
No matter the deteriorating public sentiment or concern about the company’s reliance on mobile ads, businesses are shelling out increasing amounts of money to get their brands in front of the social network’s users.
Facebook said in its first quarter earnings report on Wednesday that cash and equivalents rose to $44 billion in the period. That’s more than double the amount the company held just two years ago, when its cash stockpile sat at $20.6 billion.
By contrast, Alphabet’s cash during that stretch has increased 37 percent to $102.9 billion, while Apple’s has jumped 32 percent to $285.1 billion.
Facebook shares climbed in extended trading on Wednesday after earnings and revenue sailed past analysts’ estimates. The company is proving that even with the Cambridge Analytica scandal and concerns over user privacy and the spread of fake news, businesses can’t afford to pull dollars away from Facebook’s 2.2 billion monthly active users.
Facebook said that 91 percent of its ad revenue in the quarter came from mobile, up from 85 percent a year ago. The more it shifts to mobile the more profitable it becomes, with the company’s operating margin jumping to 46 percent from 41 percent in the same period last year.
“Our agency checks indicate there has not been any noticeable impact on FB ad spend following the Cambridge Analytica news,” Aaron Kessler, an analyst at Raymond James, wrote in a note prior to the earnings report. He has a “strong buy” rating on the stock.
Source: CNBC, Ari Levy, April 25, 2018. Photo credit to CNBC