Thursday, April 28th, 2016

Facebook surges beating predictions, to issue non voting shares

Narada Desk | April 28, 2016 10:44 am Print


Beating Wall Street predictions Facebook’s revenue rose by 50 percent in the last quarter.

Facebook also announced it will create a new class of non-voting shares in a move aimed at letting Chief Executive Officer Mark Zuckerberg give away his wealth without relinquishing control of the social media juggernaut he founded.

That would allow Zuckerberg, who wants to give away 99 percent of his wealth, to sell non-voting stock to fund philanthropy and keep the voting stock that assures his control

After this the company’s shares rose 9.5 percent in after-hours trading on Wednesday to $118.39, setting it on track to open at a new high on Thursday, at nearly triple its initial public offering four years ago.

Some 1.65 billion people used Facebook monthly as of March 31, up from 1.44 billion a year earlier. Zuckerberg said users were spending more than 50 minutes per day on Facebook, Instagram and Messenger, a huge amount of time given the millions of apps available to users.

Advertisers are shifting money from television to web and mobile platforms, and Facebook is one of the biggest beneficiaries. It faces fierce competition in the mobile video market, where rivals Snapchat and YouTube also garner billions of video views every day.

Facebook recently expanded its live video product, rolling out several new features and making it more prominent on the app to encourage users to create videos and share them. The quarterly results showed success attracting advertisers with the move, and the company was able to expand its operating profit margin to 55 percent from 52 percent a year earlier.

Facebook did not offer details on sales of its Oculus Rift virtual reality headset, but emphasized that it was early days and said that sales would not significantly impact 2016 revenue.

The results come after disappointments for investors from several major Silicon Valley firms.

“After Intel and IBM last week, and then Twitter and Apple yesterday, this is by far the best number I’ve seen in technology,” said Daniel Morgan, senior portfolio manager at Synovus Trust Company which owns about $40 million worth of Facebook shares, commenting specifically about Facebook ad revenue.

Facebook has not begun advertising on some of its most popular apps. “They haven’t yet turned on the monetizationspigot for Messenger or WhatsApp, so there should besignificant headroom still,” said Jan Dawson, chief analyst atJackdaw Research.

The company’s net income attributable to commonshareholders nearly tripled to $1.51 billion, or 52 cents pershare, in the first quarter from $509 million, or 18 cents pershare, a year earlier.

Excluding items, the company earned 77 cents per share,beating Wall Street’s 62-cent consensus.

Total revenue rose to $5.38 billion from $3.54 billion, with adrevenue increasing 56.8 percent to $5.20 billion. Mobile adrevenue accounted for about 82 percent of total ad revenue,compared with about 73 percent a year earlier.

Analysts on average had expected revenue of $5.26 billion.

If the stock proposal is approved – and Zuckerberg has amajority of voting stock – the company will effectively carryout a 3-for-1 stock split, issuing two shares of non-votingClass C capital stock as a one-time stock dividend for eachshare of Class A and Class B common stock.

Zuckerberg and his wife, Priscilla Chan, announced last year that they would give away 99 percent of their Facebookshares to fund charitable endeavours.

Investors said they were not concerned that Zuckerbergwould have increasing control, pointing to the company’sconsistent ability to grow and exceed expectations.