Muted Market Reaction To Facebook Second Quarter Earnings Beat

Shares of Facebook, Inc. (NASDAQ: FB) traded down marginally in after-hours trading. As of 6 p.m., Facebook shares are down 3.28 percent or $3.09 to $93.90. After the close of the regular session, Facebook reported its second quarter 2015 financial results. The consensus among Wall Street research firms was for earnings per share of $0.47 and sales of $3.99 billion. Facebook handily beat these numbers reporting EPS of $0.50 and sales of $4.23 billion.

Market reaction might best be described as muted. Going into this evening’s announcement Facebook shares were already up 24.3 percent year-to-date and sat just $2.25 below all-time price highs. Over the same period, the NASDAQ Composite, of which Facebook is a member, was up 7.9 percent. Facebook shares have a relative strength rating of 91. This means that shares of Facebook have outperformed 91 percent of companies in the broad market over the past 12 months.

The American Press is reporting that the total number of Facebook monthly users increased 13 percent year-over-year to 1.49 billion. The number of of mobile Facebook monthly users increased 23 percent year-over-year to 1.31 billion, with an average of 844 million mobile users per day and 968 million daily users overall. Research analyst Nate Elliot with Forrester Research was quoted as follows.

“Once again Facebook has proven its ability to attract and retain users. It’s particularly impressive that users are more engaged than ever before – that the percentage of monthly users who visit every day continues to grow.”

Double Digit Facebook Growth For Foreseeable Future

The $0.50 Facebook EPS number represents 56.25 percent growth from the $0.32 the 800-pound social networking gorilla reported in the second quarter of 2014. Quarterly Facebook revenues are up 37.1 percent from $3.2 billion in 2014.

Facebook reported a profit margin of 31 percent, which is down from 2014 levels of 48 percent, but still extremely healthy. Facebook is also an essentially cash business. It carries less than $200 million in debt, which is tantamount to petty cash for a company with $4 billion in quarterly revenues. Facebook debt to equity is less than 1 percent.

Going into this evening’s report, 43 research firms offered price targets for Facebook shares: their average was $100.93. The average recommendation given by research firms was 1.8 with 1.0 being a strong buy and 5.0 being a sell.

For the full 2015 fiscal year, analysts see Facebook earning $2.01 per share with that figure growing to $2.67 in 2016, or 13.6 and 32.8 percent respectively. The 32.8 percent 2016 number is sure to catch investors’ attention. Over the past five years, Facebook EPS has grown at an average annual rate of over 80 percent. Facebook EPS growth is seen averaging just under 28 percent annually over the next five years.

Full year 2015 sales are seen at growing 37.3 percent to $17.1 billion, and again growing handsomely in 2016: 34.0 percent to $22.9 billion.

Shares of fellow social network Twitter, Inc. (NYSE: TWTR) were down 14.5 percent today after beating EPS and sales estimates last night. LinkedIn Corporation (NYSE: LNKD) is expected to report second quarter earnings tomorrow.

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