Newspaper article International New York Times

Facebook Showing Solid, Steady Gains ; Rivals, Meanwhile, Warn of Rough Times Ahead, and Their Shares Tumble

Newspaper article International New York Times

Facebook Showing Solid, Steady Gains ; Rivals, Meanwhile, Warn of Rough Times Ahead, and Their Shares Tumble

Article excerpt

The social media company reported continued growth in users, with 1.49 billion people logging on at least once a month.

Drama may be exciting, but consistency makes for better performance in the stock market.

Facebook reported second-quarter revenue and profits on Wednesday that exceeded Wall Street's expectations. More important, the company has maintained steady growth in both revenue and users -- a feat that has eluded smaller social networking companies like Twitter and Yelp, which both warned of dim outlooks this week and had their stock prices plunge.

With Facebook, "there is no negative inflection in the growth rate," said Mark Mahaney, an Internet analyst at RBC Capital Markets, noting that the company's operating profit margin of 55 percent, smoothed out for currency fluctuations, now rivals that of Google at its peak. "They are showing remarkably consistent results at massive scale."

During a conference call with investors to discuss the results, Mark Zuckerberg, Facebook's chief executive and co-founder, said that the company would make money from newer businesses like Messenger and WhatsApp the way the company did from its news feed -- carefully. "So we ask for some patience on this to do this correctly," he said.

Facebook, whose stock is up about 30 percent over the past year, has largely earned that patience from investors because of its steady performance over the last two years, as it shifted from a web- focused company into a mobile one, and invested in new businesses while increasing the size of its old ones. Its stock fell about 3 percent on Wednesday after releasing its results, but analysts said that was primarily a pullback from a recent quick rise.

Twitter, by contrast, has reported two quarters of disappointing results and has been struggling for the last year to come up with a viable plan to attract new users even while old users visit the service less frequently than ever. Yelp, a social review site, is also trying to find a new business model as its traditional advertising slows, and mobile users turn to other sites like Google for information on local businesses.

Both companies warned investors on Tuesday evening that rough times were ahead. Twitter's stock fell more than 14 percent on Wednesday, and Yelp plunged 25 percent. It was the second consecutive quarter that the two companies' share prices dropped sharply after their earnings were announced.

LinkedIn, another well-known social media company that disappointed Wall Street three months ago, was to report its quarterly results on Thursday.

Facebook's namesake social network has kept drawing in new users and has persuaded them to come back frequently.

The company said that 1.49 billion people logged on at least once a month during the quarter, up from 1.44 billion in the first quarter. …

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