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Comment by utopcell | Hacker News Reader

From the article: ``The company reported 1.47 billion daily active users, while Wall Street expected 1.49 billion; it logged 2.23 billion monthly active users, as analysts expected 2.25 billion.''

It doesn't feel like the results justify the 20% drop.

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You missed this from their earnings.

“Our total revenue growth rates will continue to decelerate in the second half of 2018, and we expect our revenue growth rates to decline by high single-digit percentages from prior quarters sequentially in both Q3 and Q4."

It doesn't feel like the results justify the 20% drop.

You have to remember one main way analysts estimate what a share is worth today - they model out time-discounted earnings in perpetuity. A company that is expected to grow in the future is worth much more today than a company that isn't expected to grow at all.

The stock didn't drop because they missed this quarter alone, it's because all the analysts models are now assuming future earnings will grow much more slowly into the foreseeable future.

Facebook MAU was flat in the U.S. and Canada.

It declined in Europe.

Expect total expense growth to exceed revenue growth in 2019.

Also expect revenue growth rates to decline by high single digit percentages from prior quarters sequentially in Q3 and Q4.

They painted a rough road ahead compared to how the stock had been valued in many people’s models.

I can see the decline in Europe being unsettling, but I'm not really surprised about US/Canada. ~185 million is about 52% of the population of US/Canada [3]. If we assume 35% of the population is simply too young to use it (20% under 14 [2]) or too old to be drawn to it (15% is over 65 [1]), that leaves only 13% of US/Canada's population which are feasible MAUs no being MAU, which is crazy.

[1]: https://www.census.gov/newsroom/facts-for-features/2017/cb17...

[2]: https://data.worldbank.org/indicator/SP.POP.0014.TO.ZS

[3]: https://www.wolframalpha.com/input/?i=185+million+people+%2F...

Yes, and that's a massive problem. They reached probably what is close to their peak capacity and need to find ways to extract more money out of their existing MAUs because those numbers are stagnant or dropping.

Is it safe to say they're now tied to economic growth in developing nations? I'm sure they'll find ways to make more money out of rich countries for the sake of short-term growth, but if India alone is over 1 billion people, it's interesting to think that over the long term their revenue will depend on the increase of purchasing power in that and other developing nations.

Of course if they're still dominant when this happens.

Long-term, yes, that's basically the only thing they can do. Short-term the imbalance in ARPU between regions is massive and they can't really invest that much in developing nations when there's a magnitude of difference or more in between revenue, regardless of the potential user base.

I wonder how much of the European decline was driven by GDPR rules, especially opt-in requirements. GDPR-like laws are being debated on and passed here in the US by individual states. Probably a tough environment to expand on MAU right now.

Markets tend to over-optimize. That's why I warned caution when many were saying the Cambridge Analytica scandal didn't harm Facebook, even though it was obvious FB was being quite misleading about what was actually impacted at the time and about the fact that their good results were actually given by the stuff that had happened before Cambridge Analytica.

Over-optimization means that even when a string of bad news hit, the stock may not change much because of the previous string of good news still having inertia and the market "not really believing" the new bad stories. But eventually the market sentiment changes, and then it all comes crashing down, and now the bad news are over-optimized, and the good news become irrelevant. And the cycle repeats itself.

This is harder to see with stock because it tends to happen over a multi-year span, but it's much easier to see with cryptocurrencies where this happens over a several months period.

The numbers have been growing continuously since the beginning, until this quarter[1]. Traders are reacting to the idea of "peak Facebook" -- that is, an end to growth -- and not just a 1.4% drop in DAU.

[1] https://www.statista.com/statistics/346167/facebook-global-d...

And even more so -- their guidance was pretty terrible for the next couple quarters.

> It doesn't feel like the results justify the 20% drop.

Neither does it for me.

FB is still the only real GOOGL competitor in the ad market. It's revenue and market share is growing. All it has to do is extracting more money from its huge user base, which at least with instagram it hasn't really tried for now.

Employing content reviewers won't come cheap, but that investment is going to be faced by all social media platforms and in turn will be sector neutral. Facing regulatory burdens with measures like this helps the big ones manifest their oligopol.

While I can echo most HNers sentiment (I too decreased my FB usage before and after the CA scandal) I think we are not precisely the best socio-economic group to serve as indicator for what drives people or doesn't: Most people are happy to share on social media platforms (no matter how repugnant I feel about it) and there is no social media real estate like FB or IG around.

Fundamentally it's still cheaper than GOOGL in terms of P/E and just costs half of what GOOGL costs for every $ of FCF.

I presume the dollar value of a US or European user to advertisers is greater than that of an Indian or African user. European user count going down is problematic.

But the problem with these after hours sessions is that they don't have much liquidity and that you can easily have a market squeeze due to people covering their position. This is what happened with the VIX ETNs.

Everyone but most retail investors can trade during AH, while the liquidity may be lower - I'd say the participating agents are more logical and have enough capital to drive big moves.

Retail investors can easily trade after hours. With Fidelity, it’s a simple check box/request to enable it.

From their last quarterly report, quarterly ARPU is 25.91 for US/Canada users, 8.76 for European users, 2.62 for APAC users, and 1.91 for the rest of the world.

It's likely that European and US/Canada user count growth is flat or nearly so, and their gains recently have been out of getting more dollars per user through increasing advertising revenue as opposed to getting more users. It could be (or not) that they can grow those revenues even more.

There have been 34 million shares traded after hours. Avg volume during the day is 19 mil.

The issue isn't that Facebook isn't doing fine, it's that they missed their forecasts. Wall Street wants predictability and if you can't predictably forecast your next quarter/fiscal year, then you become a liability.

You could have a bad quarter and not get punished (too much) for it, assuming that your forecast was correct.

What about time spent by active users? They can still be active, all right, but not so much.

I think it's more about their revenue miss and some concern about their scandals impacting revenue.

> The company’s top line was $13.04 billion, weaker than $13.34 billion analysts expected, suggesting that the world’s largest social network has begun to feel some of the effects of the controversies that have battered it during the quarter.

Can that statistic be interpreted as 65% of people who use Facebook at all use it every day? That’s some pretty impressive stickiness

well when you have a PE ratio of 33 anything but forward progress is bad.

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