Facebook Inc (FB.O) on Tuesday relieved investors by forecasting that margins would stop shrinking after 2019 as costs from scandals ease up, sending shares up despite a second-straight quarter with record-low user growth.
Chief Executive Mark Zuckerberg repeated the company’s warning that growing user interest in private messaging, video and safer content would cause costs to rise faster than revenue for “some time.” But he said he was focused on bringing them in line.
That same guidance three months ago sparked Facebook’s biggest one-day sell-off as some investors braced for dire results. The third-quarter performance and revised guidance suggested that the downward trend would be more gradual and taper off after 2019, financial analysts said.
Shares of Facebook traded up about 3 percent after updating its forecast. They reversed course several times, falling and gaining as much as 5 percent, during an hour of volatility after closing on Tuesday up 2.9 percent at $146.22.
Facebook, Amazon.com Inc (AMZN.O) and Google parent Alphabet Inc (GOOGL.O) had suffered a battering over the last month on Wall Street after leading a years-long rally. Slowing growth has been a top concern, and Facebook’s weak results did not squash those fears.
“The best news was that the quarter was just not a disaster,” Ivan Feinseth, analyst at Tigress Financial Partners, told Reuters.
The company estimated revenue growth would slow in the current quarter, compared with last quarter, which could mark the worst performance since its initial public offering in 2012.
The main Facebook service and its Messenger sibling grew monthly users to 2.27 billion, up 10 percent compared with a year ago but a percentage point below both expectations and last quarter’s pace.
Zuckerberg said that Facebook’s problem is that users are gravitating toward features such as direct messaging and video viewing faster than it can find ways to place ads there while attracting clicks and not annoying users.
Adding to the challenge is that the bulk of new users are from countries including India, Indonesia and Philippines where advertisers focus more on TV, print and outdoor advertising, Facebook executives said.
Average revenue per U.S and Canadian user grew 6.7 percent in third quarter compared with the same period last year. Growth for Asian-Pacific users was 4.6 percent.
reuters
