Facebook earnings: Inside its stock roller-coaster ride
Facebook's earnings results and conference call commentary sent its stock and investors on a roller-coaster ride.
The shares initially jumped more than 16 percent on better-than-expected results, particularly in mobile. They then gave up those gains and turned negative after the bell, when CFO David Ebersman admitted that there's something to concerns that Facebook is losing its cool factor with teens and that daily activity among younger teens has declined.
(Did Facebook flub how it presented this data point, without context? It was not clear that he was referring only to young teens in the US, which comprises about a tenth of Facebook's overall 1.2 billion user base, and that he was not including Instagram, just Facebook.
If there were a similar decline overseas Facebook would have had to disclose that. Declining use among youngest teens—13 and 14 year-olds—means usage among 15-19 year-olds must have increased in order for total teen usage to have held steady.)
Regardless of the comments that spooked the Street, the company's results were strong.
The focus on mobile that CEO Mark Zuckerberg and COO Sheryl Sandberg have stressed is paying off: Mobile now represents 49 percent of the company's advertising revenue of $881 million. The percentage growth is striking: up from 41 percent in the second quarter, 30 percent in the first and 14 percent a year ago.
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This continued growth toward a mobile-first company explains why the stock surged even after gaining 50 percent since its last earnings report.
But what about its dramatic decline after the close?
Ebersman said "youth usage among U.S. teens was stable overall from Q2 to Q3, but we did see a decrease in daily users among younger teens." Facebook didn't break out the age range he referred to and said it's not concerned about such "granular" data.
Analysts on the earnings call didn't ask a single question about the statement, but investors certainly did. Ebersman said that Facebook is addressing the potential problem, making an effort to develop tools and services to keep that younger demographic engaged. This news comes two weeks after Facebook changed its policy to allow teens to post publicly—not just to friends of friends—while making its default sharing for this group to friends more private.
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All of Facebook's key numbers beat expectations. Total revenue grew 60 percent, to $2.02 billion. Earnings per share rose to 25 cents from 12 cents a year ago and were 6 cents better than expected. Average revenue per user grew to $1.72, 10 cents better than Wall Street analysts forecast. And the social network continues to expand its reach, with monthly active users up 18 percent.
Zuckerberg seemed upbeat on the call, discussing the potential in graph search, video ads and mobile, and an expanded user base. He indicated that Facebook is working to launch more stand-alone apps, saying that building on the success of Instagram and Facebook's messenger app, "we expect to develop more distinct services to allow people to share with different groups."
Sandberg focused on how well Facebook's ads work, and the upside of working closely with brands, and Madison Avenue. Her focus centered on improving measurement of ads impact.
Immediately after the numbers crossed, Ebersman told CNBC that "investments made over the last couple of years are paying off: growing mobile usage, product development."
The number one thing driving Facebook's business are newsfeed ads, he said. "They work, they enable marketers to reach a broad and a wide audience, at a time they're really engaged." That includes reaching users on mobile devices.
—By CNBC's Julia Boorstin. Follow her on Twitter: