Facebook impressed last week with its highest scoring earings call of the year on 10/30/18. We use Viewer to gather insights on past and present earnings sentiment to explore two questions: what drove the positive outcome and is this a sustainable trend?
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:
Very Bullish Company Profile: Of the 53 core financial extractions in the Amenity model, 43 (81%), were positive. Key data points included an uptick in mobile and revenue and optimism on monetization of the Stories feature.
Optimism on market position with diverse portfolio of products: In addition to Stories, optimism on monetizing multiple arms of the business boosted the call's sentiment.
Most promising collection of external factors: The macroeconomic factors (classified as Headwinds and Tailwinds) referenced in the call were collectively the most bullish of the year. After only two of the ten of such extractions *20%) were bullish in Q2, the Q3 call comprised a much more bullish mix with three positive extractions of the four (75%). Unlike recent calls the highlighted security issues, this call's extractions emphasized initiatives to improve safety and security.
1. Safety and Security: Security issues have been at the forefront of investor concerns all year, on the heels of the Cambridge Analytica scandal. These concerns have been prevalent all year and account for much of the negative highlights in the transcript:
2. Deception: The Amenity NLP model is trained to capture linguistic patterns that indicate potentially evasive language, particularly in the context of answering questions. Any extractions that fit this criteria are inherently negative; Facebook’s Q3 call had ten captured references, which was the same as in Q2 and twice as many as the five extractions from Q1. Interestingly, like in the Q2 call, much of this revolved around monetization of Stories:
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:
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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