The Q3 earnings report released yesterday (Wednesday) gives us some clues…
FB stock surged 14% in after-hours trading Wednesday, after the social media giant announced a third-quarter profit of $425 million, or $0.17 a share.
Unfortunately for shareholders, the rally didn't last long, as FB shares dipped back into the negative shortly after 6 p.m.
Earlier in the afternoon, Facebook reported that earnings per share stood at $0.25, beating analysts' estimates of $0.19 for the quarter. This time last year, Facebook earnings were reported at $0.12 a share, and the company suffered a profit loss of $59 million, or $0.02 a share.
Mobile advertising accounted for 49% of the company's advertising revenue, a total of approximately $881 million.
There are now more than 1.19 monthly active Facebook users, representing an 18% increase in the past year. Approximately 507 million active monthly users access their accounts from a mobile device. For every mobile app downloaded, Facebook officials continue to see dollar signs.
"They're doing what they're supposed to be doing: Beating numbers and setting expectations low," Wedbush analyst Michael Pachter told MarketWatch. "Revenue was great, opex far lower than they guided to, so that pretty much explains the earnings-per-share upside.
"The real takeaway is that they are starting to show leverage, so they should see earnings accelerate on more modest revenue growth going forward."
The mobile advertising news pushed the social media stock up 14% shortly after 4 p.m. Wednesday, but those gains reversed after the earnings call.
That's when Chief Financial Officer David Ebersman told investors and analysts the number of daily-active young teens decreased this quarter. So for every mom who joins the social media site, her preteen daughter appears more hesitant to log on.
He does maintain, however, that youth engagement is "stable."