Facebook shares are skyrocketing after a massive earnings beat, despite a year full of controversy

Key Points
  • Facebook shares skyrocketed after a strong earnings report for its fourth quarter of 2018, proving it could continue to expand its business in the face of controversy.
  • The company grew revenue, earnings and active users.
  • Facebook also reported 7 million active advertisers across its services.
Facebook surges after earnings beat — Three analysts on what's next for the stock

Facebook skyrocketed 10.8 percent Thursday after beating analyst expectations on revenue and earnings for its fourth quarter of 2018. Its market value jumped about $47 billion.

The strong report showed Facebook continued to grow users and revenue in all of its key regions despite numerous privacy scandals that caused widespread consumer backlash throughout the year. Facebook reported earnings of $2.38 per share on revenue of $16.91 billion, easily topping analyst predictions of $2.19 per share on revenue of $16.39 billion, per Refinitiv consensus estimates.

Facebook proved with the report that it was able to hang onto advertisers, who investors once feared would be scared off by the company's controversy. Chief Operating Officer Sheryl Sandberg told investors on a call after the report that the company has more than 7 million advertisers across its services.

The social network warned its next report could be less impressive, saying it anticipates a revenue deceleration for Q1 2019. Facebook projected a 40 to 50 percent jump in full-year expenses compared with full-year 2018.

In notes Thursday morning, analysts were largely bullish on the stock, indicating the worst may be behind Facebook.

"This story is starting to get good," Morgan Stanley analyst Brian Nowak wrote in the title of his note, raising his price target to $190.

"Facebook's strong finish to 2018 – across the board 4Q revenue, EBIT, EPS and active user beats – speaks to the strength of its engagement, ad offering and ability to drive earnings power ... even while navigating public scrutiny and aggressively investing to improve its platform safety/security, product offerings, and monetization," Nowak wrote.

Analysts did not seem too concerned about the tempered guidance.

"While the 2019 margin outlook will continue to draw questions, we think 1Q revenue outlook appears conservative with upside potential," Bank of America's Justin Post said.

Raising his price target, Mark Mahaney of RBC said, "We feel we could be in a period of sustained rerating as the worst Facebook fears appear not to have been realized."

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