In Your Face(book)

The Record (Troy, NY) - - BUSINESS -

Many in­vestors have been wor­ried that Face­book’s (Nas­daq: FB) growth rate would hit a wall, but its lat­est earn­ings re­port in­stead showed signs of sig­nif­i­cant op­er­at­ing mo­men­tum. Its num­ber of monthly ac­tive users jumped 11 per­cent year over year to over 2.2 bil­lion peo­ple (!) in the sec­ond quar­ter of 2018; roughly two-thirds of those folks logged in to the ser­vice at least once a day. Face­book had no trou­ble mon­e­tiz­ing all of that en­gage­ment, ei­ther, as ad­ver­tis­ing sales spiked 42 per­cent year over year to $13 bil­lion. Face­book’s av­er­age rev­enue per user has room to grow, and the com­pany is still early in the game in ex­ploit­ing the fast-grow­ing on­line ad­ver­tis­ing in­dus­try. Im­por­tantly, it also owns other ma­jor so­cial me­dia busi­nesses, in­clud­ing What­sApp and In­sta­gram. Its me­dia em­pire gen­er­ates a gross profit mar­gin of 83 per­cent and an op­er­at­ing profit mar­gin of 44 per­cent. Sure, the com­pany’s ex­pan­sion pace is slow­ing, as tends to hap­pen with com­pa­nies that grow huge. It’s also likely that its fat profit mar­gins will shrink some as Face­book spends bil­lions bulk­ing up its data in­fra­struc­ture and rolling out ser­vice im­prove­ments. But there’s no so­cial me­dia busi­ness that can come close to claim­ing the com­mu­nity en­gage­ment Face­book has at­tracted, let alone its mar­ket-thump­ing earn­ings power. With its core busi­ness look­ing healthy, this stock could be poised for strong long-term gains. (The Mot­ley Fool owns shares of and has rec­om­mended Face­book.)

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