Facebook's Mixed Earnings Point to Slowing Growth Ahead
*By Alex Heath*
Facebook ($FB) shares whipsawed in after-hours trading Tuesday after the company just narrowly missed revenue and user estimates and forecast a continued ramp-up in spending.
The world’s largest social network reported revenue of $13.73 billion, just shy of Wall Street’s consensus estimate of $13.38 billion, and strong earnings per share of $1.76. But daily user growth in North America — the world’s most valuable ad market — remained flat for the third straight quarter. And in Europe, Facebook lost 1 million daily users on top of the 3 million it lost last quarter.
For the first time, Facebook revealed that 2.6 billion people use at least one of its services, including Instagram and WhatsApp, every day.
The cost of maintaining Facebook’s unprecedented scale is increasing, however. The company’s headcount swelled to more than 33,000, up 45 percent from the previous year, as regulators around the world continue to apply more pressure on Facebook’s data collection and privacy practices. Facebook said its capital expenditures would reach an upwards of $20 billion in 2019, well above Wall Street's consensus estimate of $17.3 billion.
After Facebook’s missed its second quarterly earnings results back in July, the company’s market value plummeted more than $200 billion — the single largest drop in stock market history. Facebook forecast that its revenue growth will continue to slow amidst plateauing user growth, which caused many Wall Street analysts to reevaluate the aggressive price targets they had given the stock.
On the company’s latest earnings call with investors Tuesday, CEO Mark Zuckerberg said that he expects 2019 “to be another year of significant investment” as the company grapples with privacy scandals, misinformation, and fundamental shifts in its business.
Zuckerberg said that he expects the Stories format, which Facebook copied from Snapchat in 2016, to eventually be used more than Facebook’s current cash cow, the News Feed. Facebook has started showing ads in Stories on Instagram and the Facebook app, but Zuckerberg warned that the business transition will be similar to the company’s early, painful shift from desktop PCs to mobile devices.
Zuckerberg also highlighted video opportunities with Watch, Facebook’s YouTube competitor that features a mix of exclusive shows and video from media partners. While Facebook is seeing exponential user growth in Watch, Zuckerberg said the service is still “early” in being able to compete with YouTube for ad dollars and user attention.
“It will take some time for our business to catch up to our community growth,” Zuckerberg said.
A big-screen adaptation of the anime “Chainsaw Man” has topped the North American box office, beating a Springsteen biopic and “Black Phone 2.” The movie earned $17.25 million in the U.S. and Canada this weekend. “Black Phone 2” fell to second place with $13 million. Two new releases, the rom-com “Regretting You” and “Springsteen — Deliver Me From Nowhere,” earned $12.85 million and $9.1 million, respectively. “Chainsaw Man – The Movie: Reze Arc” is based on the manga series about a demon hunter. It's another win for Sony-owned Crunchyroll, which also released a “Demon Slayer” film last month that debuted to a record $70 million.
The Federal Aviation Administration says flights departing for Los Angeles International Airport were halted briefly due to a staffing shortage at a Southern California air traffic facility. The FAA issued a temporary ground stop at one of the world’s busiest airports on Sunday morning soon after U.S. Transportation Secretary Sean Duffy predicted that travelers would see more flights delayed as the nation’s air traffic controllers work without pay during the federal government shutdown. The hold on planes taking off for LAX lasted an hour and 45 minutes and didn't appear to cause continued problems. The FAA said staffing shortages also delayed planes headed to Washington, Chicago and Newark, New Jersey on Sunday.
Boeing workers at three Midwest plants where military aircraft and weapons are developed have voted to reject the company’s latest contract offer and to continue a strike that started almost three months ago. The strike by about 3,200 machinists at the plants in the Missouri cities of St. Louis and St. Charles, and in Mascoutah, Illinois, is smaller in scale than a walkout last year by 33,000 Boeing workers who assemble commercial jetliners. The president of the International Association of Machinists says Sunday's outcome shows Boeing hasn't adequately addressed wages and retirement benefits. Boeing says Sunday's vote was close with 51% of union members opposing the revised offer.
The stunning indictment that led to the arrest of more than 30 people — including Miami Heat guard Terry Rozier and other NBA figures — has drawn new scrutiny of the booming business of sports betting in the U.S. The multibillion-dollar industry has made it easy for sports fans — and even some players — to wager on everything from the outcome of games to that of a single play with just a few taps of a cellphone. But regulating the rapidly-growing industry has proven to be a challenge. Professional sports leagues’ own role in promoting gambling has also raised eyebrows.
Tesla, the car company run by Elon Musk, reported Wednesday that it sold more vehicles in the past three months after boycotts hit hard earlier this year, but profits still fell sharply. Third-quarter earnings fell to $1.4 billion, from $2.2 billion a year earlier. Excluding charges, per share profit of 50 cents came in below analysts' estimate. Tesla shares fell 3.5% in after-hours trading. Musk said the company's robotaxi service, which is available in Austin, Texas, and San Francisco, will roll out to as many as 10 other metro areas by the end of the year.
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