FANG Financial Results are Mixed

While Facebook hit the cover off the ball in the Q1, for the second consecutive quarter, Alphabet, the parent company that operates Google reported disappointing financial results. After fourth-quarter numbers were released, shares of Alphabet fell because of higher-than-expected capital expenditures and a lower operating margin. On Monday, April 29, the company released Q1 financial results that beat on the bottom line but missed on revenue. Alphabet shares sank taking out nearly 60 billion off Alphabet’s market cap.

photo/ Public domain pictures via Pixabay

Alphabet’s financial Results

While the company beat on the bottom line, the miss on the top line generated significant headwinds for the company. Earning per share came in at $11.90 compared to expectations that the company would earn $10.61.  Revenue, on the other hand, missed expectations. Alphabet one of the premier FANG stocks reported revenue of $36.34 billion versus expectations that the company would produce sales of $37.33 billion. Costs for the company as it pertains to traffic declined which was positive. The company reported that traffic acquisition costs declined to $6.86 billion versus expectations of $7.26 billion.  The company also reported that paid clicks on Google properties increased by 39%. While this appears to be very strong, it’s a decline from 66% in the Q4 of 2018. Additionally, costs per click on Google properties declined by 19%, which is seen as positive.

Google Growth is Decelerating

Google is experiencing decelerating growth after consistently expanding at 20% or more in prior periods. Revenue increased 17%, down from growth of 28% year over year, and ad sales rose 15%, down from 24% a year ago. The paid clicks amount increased 66% on the Q4 as mentioned earlier and was up 62% in the Q3 of 2018. What this means is that Google properties are not growing traffic in volumes as quickly to make up for declines in advertising prices.

Facebook Reported Solid Q1 Results

Facebook, meanwhile, exceeded revenue expectations and matched estimates for its daily active user growth. The company reported EPS of $0.85 per share. Revenue came in at $15.08 billion compared to expectations of $14.98 billion. Daily active users were 1.56 billion, which was in line with expectations. Monthly active users were 2.38 billion, versus expectations of 2.37 billion. The average revenue per user was $6.42, versus expectations of $6.39. The company said it counts 2.7 billion monthly users across all its family of apps, which is unchanged compared to last quarter. The company experience a surge in its user base in Europe which increased to 286 million daily active users, up from 282 million last quarter. The company’s user base in the US and Canada remained unchanged at 186 million. The company said average revenue per user was $6.42, up 16% from $5.53 a year ago. The better than expected financial results allowed Facebook share trading to form an uptrend, as the stock price looks to break out to higher levels.

Author: Justin R.


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