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Facebook Earnings Topple Estimates As Digital Ad Spending Climbs

Facebook (FB) reported second-quarter results late Wednesday that beat estimates, coming as the digital advertising for social media stocks overall has been on the upswing . Facebook stock dropped.




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The social media giant reported adjusted earnings of $3.61 a share on revenue of $29.1 billion. Analysts expected Facebook to report earnings of $3.04 a share on revenue of $27.8 billion, according to FactSet.

Facebook stock, which recently topped $1 trillion in market valuation, dropped 4%, near, near 358.95, during after-hours trading on the stock market today. In the regular session, it hit a new intraday high of 377.55.

Facebook reported having 1.91 billion daily active users, vs. estimates of 1.9 billion.

The Facebook earnings report follows that of Snap (SNAP) and Twitter (TWTR) last week. Like Facebook, the two derive almost all their revenue from advertising. Snap and Twitter both exceeded estimates as advertising revenue came in better than expected. The same is true of Google owner Alphabet (GOOGL), which reported second-quarter earnings late Tuesday.

Meanwhile, Twitter stock jumped 2.4% Wednesday, closing at 69.96.  That happened as the company announced the launch of Shop Module, which can be used for purchasing products and where businesses can showcase them.

Facebook Stock Bolstered By Ad Recovery

“Our view for 2021 was that a global economic recovery would create more demand for digital advertisements,” KeyBanc Capital Markets analyst Justin Patterson said in a note to clients, prior to the earnings report. “In short, this is a very strong ad market.” Patterson added that should prove particularly strong for Facebook. He has an overweight rating on Facebook stock and price target of 414.

This year, Facebook has launched new initiatives to expand advertising across more parts of its platform. This includes efforts to drive increased user engagement and increased e-commerce efforts.

“Despite some expected headwinds this year, including growing antitrust battles, we anticipate Facebook will benefit from improved ad spending and capitalize on accelerated digital transformation with new initiatives,” Brian White, analyst at Monness Crespi Hardt, said in a note to clients before the earnings report. His price target on Facebook stock is 460, with a buy rating.

Facebook, Amazon (AMZN), Apple (AAPL) and Alphabet are under pressure from Washington lawmakers that want to reduce the dominance of Big Tech amid concerns of monopoly power.

The crackdown comes at the same time a massive new digital wave may be on the way for tech stocks.

Facebook stock is currently extended and out of buy range. It is on the IBD 50 Leaderboard list of top-performing stocks.

More to follow.

Please follow Brian Deagon on Twitter at @IBD_BDeagon for more on tech stocks, analysis and financial markets.

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