Facebook (FB) impressed last week with its highest scoring earnings call of the year on 10/30/18, as the stock began to rebound from its 35% slide since the last reported earnings. What about its last call caused Facebook to slide so far off its highs? Has Q3 changed the story?
We used Amenity Viewer to analyze Facebook's recent earnings calls to look for insights related to those key questions within minutes and show you how our Amenity Score (the change in earnings sentiment from the previous quarter) can serve as an important starting point for your analysis.
At a high level, the following takeaways starting with the Amenity Score provide an overview of the analysis in Amenity Viewer before even opening the transcript and reading the text itself:
"Hi, everyone. It was another good quarter for our business with ad revenue up 33% year-over-year. Our growth was broad-based across regions, marketer segments and verticals. Mobile ad revenue grew 40% to $12.5 billion, making up approximately 92% of our total ad revenue."
"But I would say that, at least in the near term, the impression growth opportunity is significant on Stories."
"...we continue to see good growth opportunities for revenue across both Facebook and Instagram, including both Feed and Stories"
"In Q3, we expanded Marketplace ads to nearly 70 marketers. It's early days, but advertisers are seeing good results."
"People now send around 100 billion messages each day using our services that even our second-most popular service, Messenger, has a highly - a higher daily message volume than SMS had globally at its peak."
"That means the trends in how people are interacting have improved"
"That's why we're making significant ongoing investments to better protect privacy and security."
"We also continue to invest heavily in technology and people to remove bad content as quickly as possible."
"Three, we continue to face increased safety and security threats. We have significantly improved our systems here but we have more to do."
"So let me start by saying that last month, we had a serious security issue"
"Elections are a special case, an extremely important special case of the content and safety issues and security issues that we face"
"And as I said in my opening remarks, I think we're going to be a lot better positioned here in Facebook in the next year."
"But I can't tell you just yet what that timeframe is going to look like"
"It's obviously hard to say that because they're both dynamic, they're auctions, there's a lot going on. But I would say that, at least in the near term, the impression growth opportunity is significant on Stories"
"The question is will this monetize at the same rate as News Feed. And we honestly don't know. We'll have to see what happens."
"...but what I can say is that all of the trends that we've seen suggest that in the not-too-distant future, people will be sharing more into Stories than they will into Feeds… But I can't tell you just yet what that time frame is going to look like."
3. Currency Headwinds In-line with Guidance: Viewer identified the changes in currency valuation that adversely affected Facebook’s financial profile; however it’s worth noting Facebook had warned investors about emerging currency pressure in their Q2 call:
"For example, we expect currency to be as light headwind in the second half versus the tailwinds we have experienced over the last several quarters."
"First of all, there's the currency, which is going from being a tailwind to being a modest headwind"
"Rest of World ad growth trailed at 26% due to both currency weakness and economic challenges in Latin America."
Lowering guidance in Q2 was very significant to the company’s overall profile, as it was the first revenue miss for the tech-giant in over three years. While it would be unrealistic to expect the story to change substantially after only one quarter,a better quarter highlighted by optimism in newer products bode well for investors. The highlights of last week’s call suggest the monetization of WhatsApp,Stories, and Messenger will be a key gauge in evaluating the next quarter’s call in addition to the company’s progress addressing security concerns.
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This communication does not represent investment advice. Transcript text provided by S&P Global Market Intelligence.
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