Facebook Inc. (FB.O) shares rose after the largest social media company reported strong quarterly sales growth and signaled that it may be close to solving the US privacy investigation that alleviates investor concerns about the impact of regulatory threats.
Sales for the first quarter jumped 26% and monthly visitors to the Facebook main site outperformed the forecasts. The company also said on Wednesday that it set aside three billion dollars in the quarter, linked to a request from the US Federal Trade Commission. The Federal Trade Commission is discussing Facebook with potential violations of the 2011 consent decision following confidentiality mistakes. Facebook estimates that the loss associated with each settlement could reach $ 5 billion.
Shares jumped 8.7 percent, most from January, to $ 198.48. on Thursday morning in New York. This year they earned 49%. More than ten companies raised their price targets on the stock exchange, while UBS improved its vision, reinforcing Facebook Wall Street fans, where about 80 percent of analysts' ratings are equivalent to purchases.
Better than expected revenue shows that users and advertisers were not excluded from a series of privacy violations, scandals, and questions about the company's influence on political discourse. Facebook's business remains resilient, mostly due to the growing 2.7 billion average monthly users and its ability to allow marketers to accurately target them to ads.
"Advertisers continue to stay on Facebook despite their many challenges," EMarketer analyst Debra Aho Williamson said in a post-report note. "What most cares about is the vast user base and targeting capabilities."
Quarterly sales rose to $ 15.1 billion, according to California-based Menlo Park. That outpaced the average forecast of Bloomberg analysts for $ 14.97 billion. Facebook's social network has already reached 1.56 billion users each day, comparing Wall Street estimates and an average of 2.38 billion a month, slightly better than expected.
The company's sales growth is increasingly being driven by the Instagram photo sharing application and the ad in its Stories, Snapchat copycat feature. Facebook has also recently begun testing an e-commerce product called Checkout, which allows people to buy products at Instagram, another potential source of revenue through the fast-growing application.
In a conference call Wednesday after the report, Chief Operating Officer Sheryl Sandberg said more than half a billion people use each of the three Stories products daily, and 3 million advertisers use this feature on the web, adding that "we definitely see a lot of value for Instagram business, and we believe that is the same for Facebook. "In the first quarter, the average price of ads has fallen, partly because more ads have been served for features like Stories that have lower prices than regular Facebook and Instagram , according to Chief Financial Officer David Wenner.
With the exception of court costs set aside for the investigation, the profit was $ 1.89. per share, exceeding the analyst's average mark of $ 1.62. Shares grew 11% in expanded trading.
Net profit, including court costs related to the FTC's investigation, fell to 2.43 billion dollars, or 85 cents per share, said Facebook. In the first quarter of last year, the company made a profit of 4.99 billion dollars, or $ 1.69 per share, at 11.97 billion dollars in sales. Facebook noted that "there can be no assurance about the timing or deadlines of any end result" with regard to the FTC's investigation. But even a fine of $ 5 billion is likely to be managed by Facebook, which had $ 45.2 billion in cash and equivalents at the end of the last quarter.
Yet, Aho Williamson said advertisers must pay attention to the further development of the company's negotiations with FTC, especially the possibility that any agreement might include changes in the way the company works. "This is a significant development, and any settlement with the FTC can affect the way advertisers can use the platform in the future," she wrote.
Over the last few years, the company has been extensively investigating the amount of personal information it collects from users as well as how it protects and shares that data. Since March 2018 reported that personal data of tens of millions of users could be shared with Cambridge Analytica's political consultants, Facebook has been the subject of research by governments around the world. Earlier this month, the company faced new criticism that it took too long to remove a live video from a massive shootout in New Zealand.
The social network has also recently revealed that millions of passwords on Facebook and Instagram have been stored unencrypted – in plain text – and visible to employees, although the company said the information was not misused. Researchers also found that Facebook user information was publicly inadvertently posted on cloud servers at Amazon.com Inc.
In an effort to stop the crisis, co-founder and CEO Mark Zuckerberg recently called for new global regulations regulating the internet, recommending governments to develop rules on hate and violence content, election integrity, privacy and portability. His statements came after Democratic US President Elizabeth Warren, a Senator from Massachusetts, called for the collapse of Facebook and other Internet companies. She said the business has accumulated too much power and damaging the economy and American democracy.
In March, Zuckerberg announced that Facebook is undertaking a major reform to focus on private, ephemeral and encrypted communication, saying that more people want to interact in person or in more intimate groups – instead of an open sharing model that has built . It is still unclear what the impact on advertisers will be. The company also seeks to integrate the various online properties on Facebook, allowing users to send messages between WhatsApp, Instagram and Facebook Messenger. Critics argue that this move would make it difficult for regulators to divide the company.
Speaking on Wednesday, Zuckerberg has confirmed that Facebook is focused on building a privacy-focused platform that, in its view, will alleviate consumer fears about privacy or the return of their posts to hurt them later. He added that Facebook does not know exactly how this change will affect business, but confident encryption will not have much impact.
"We must continue to be on both the digital city square and the digital living room," says Zuckerberg. "We understand that regulation can harm our business, but we think it's right."