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Facebook status update fails to spook investors

Facebook's shares have risen sharply after its latest results soothed investor fears of a drop-off i..

By admin , in Tech , at November 1, 2018

Facebook's shares have risen sharply after its latest results soothed investor fears of a drop-off in user growth.

The social media giant's third quarter figures released after markets closed on Tuesday showed a rise in user growth, revenue and profits.

Its update helped spark the return of positive sentiment towards the tech sector – battered this month by fears it is over-valued – during trading on Wednesday.

Its shares were up by 6%.

Facebook had warned in July of an easing in key growth rates for the rest of the year because of several pressures including the rising cost of security protection.

While the company missed analysts' estimates in terms of user growth between July and September, Facebook still achieved 2.27 billion monthly active users while daily active users rose to 1.49 billion from 1.47 billion in the previous three months.

Image: Facebook, led by Mark Zuckerberg, has seen a rise in user growth, revenue and profits

They represented annual rates of growth of 10% and 9% respectively, Facebook said. Profits were up 9% on the third quarter last year at just above $5bn.

Total revenue rose 33% to $13.73bn – on track with forecasts.

Total costs jumped to almost $8bn from $5bn in the same period last year when its honeymoon period was nearing its end.

There were fears of falling usage because 2018 has proved the toughest for Facebook after years of stunning growth since its flotation in 2012.

It has had to grapple the fallout from the Cambridge Analytica scandal new data protections for users in Europe.

The company then admitted in late September – at the end of the third quarter – that 50 million accounts had been affected by a security breach.

Costs associated with the protection of users are expected, by analysts, to continue to grow substantially while there are also market rumours Facebook is looking to buy an established cyber security firm to deliver its security promises.

Chief executive Mark Zuckerberg told analysts in a call after the results release that earnings would continue to face pressure as Facebook moved to improve the user experience, particularly in video.

He said 2019 would be a year of "significant investment", adding there was also a "long road ahead" to improve data security to where Facebook wanted it.

Christopher Rossbach, chief investment officer at J Stern & Co, which has Facebook stock within its portfolios, said of the third quarter figures: "Defying the recent market turmoil and poor sentiment, Facebook delivered a good quarter that should reassure investors."

He added: "We believe that Mark Zuckerberg and the Facebook management team are taking a prudent and proactive approach to addressing the challenges facing the company and ensuring its future growth.

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"We think Facebook's current share price represents a good opportunity for long-term investors to buy a company that has great prospects for delivering long-term growth and value to investors."

Apple is the final tech major to report its progress in the current earnings season – with those results due on Thursday.

Original Article


Sky News