After Facebook reported a $157m (£99m) loss last quarter, should investors be concerned?
YES
Aaron Padgham
Excluding staff share payments, Facebook made a second quarter profit of $295m (£187.7m), 22.9 per cent ahead of the comparable period last year. Revenue, however, rose by 32 per cent to $1.18bn, Facebook’s slowest growth rate seen since its inception. These aren’t the kind of figures one expects from a company trading – despite shares falling by 40 per cent since IPO – on a colossal earnings multiple of 50. As more and more users access the site via non-monetised platforms, such as smart phones and tablets, and the firm is still unsure about how it can bring mobile advertising to fruition, maintaining current top-line growth is going to be a challenge. I am also perplexed as to why Facebook chose not to release any future performance expectations. This has shrouded the company in even more mist and suggests there could be more nasty surprises around the corner.
Aaron Padgham is an investment analyst at T1ps.com.
NO
Richard Nunn
Facebook shares were oversold based on its first quarter’s earnings. But the question should not be about one quarter or even eight quarters of earnings, but a medium-term view of how it continues to monetise 1bn users by the end of the year. Facebook’s management was keen to highlight that advertisers are seeing significant returns from marketing spend through new ad formats. Average revenue per user was up and dwell time on the site increased by 5 per cent. The big question still fully unanswered is mobile strategy and how to monetise it – its mobile user base increased 67 per cent to 543m. Sponsored story adverts are generating $1m per day, half of which is from mobile. Nobody has yet cracked the monetisation issue on mobile, but the likes of Google and Facebook will. Facebook has $10bn in cash, so it has money and expert resources to throw at the problem. This is still a start-up coming of age.
Richard Nunn is a media analyst at Charles Stanley Securities.