Facebook’s Massive Turnaround: Is Now the Time to Buy FB Stock?

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Despite a multi-billion-dollar fine and a constant flow of negative headlines, Facebook Inc. (FB) rose from the ashes in the first quarter, posting better than expected top- and bottom-line results. The impressive turnaround was driven by raw numbers: the social media network reported more than 500 million daily active users across all of its Stories products.

Facebook’s Turnaround

The world’s largest social media network said per-share earnings grew to $1.83 in the first quarter on revenues of $1.89 on revenue of $15.08 billion. Analysts had called for an EPS of $1.62 on revenues of less than $15 billion.

Facebook’s actual profits for the quarter were $2.43 billion, or $0.85 per share, after accounting for a $3 billion fine by the Federal Trade Commission (FTC) over the Cambridge Analytica scandal. Facebook says the fine may total up to $5 billion once the dust settles.

The company reported a daily active user count of 1.56 billion for the quarter, matching estimates. The Stories feature on WhatsApp, Facebook and Messenger all crossed 500 million daily active users, joining Instagram, which achieved that feat back in January.

Stories are a pivotal transition for Facebook, which is no longer relying on News Feed ads. Stories were the largest contributor to year-over-over impression growth and will be a significant source of revenue moving forward.

“Stories are an increasingly important growth opportunity,” Facebook COO Sheryl Sandberg said. “We are helping advertisers keep up with the shift in how people are sharing just as we did with mobile.”

Sandberg said there are more than 3 million advertisers using Stories add across Instagram, Facebook and Messenger.

Shares Skyrocket

Facebook’s stock price surged double-digits in after-hours trading Wednesday and eventually crossed the $200 mark for the first time since last summer. The uptrend continued at the start of New York trading on Wednesday as FB opened nearly 8% higher.

Since the beginning of the year, FB has gained nearly 49%, more than doubling the returns of the Nasdaq Composite Index. The stock has rebounded nearly 60% off its December low.

Crisis Averted?

Facebook CEO Mark Zuckerberg has called for more regulatory guidance on data protection and political advertising. | Source: Shutterstock.

Facebook entered crisis mode in the second half of last year after the Cambridge Analytica scandal rocked investor confidence and brought the social media giant under federal scrutiny. A disastrous earnings call last summer triggered an unprecedented selloff in Facebook stock, with the company losing $120 billion in market cap in just one session. To this day, that remains the single biggest drop of all time.

In an attempt to save face, CEO Mark Zuckerberg urged lawmakers to adopt new regulations around cyber security, political advertising and online hate speech. Displeased with how Zuckerberg handled the Cambridge Analytica scandal, several prominent Facebook investors called for his ousting from the Chairman position.

With Facebook growing in all the right places, it seems that the crisis has been averted for now. Investors should still tread cautiously given that the stock is 7% off its record high, which means the current growth trajectory is unlikely to continue.

Disclaimer: Author holds no investment position in Facebook Inc.

Author:
Chief Editor to Hacked.com and Contributor to CCN.com, Sam Bourgi has spent the past nine years focused on economics, markets and cryptocurrencies. His work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Avid crypto watchers and those with a libertarian persuasion can follow him on twitter at @hsbourgi