Facebook soars on mobile ad boom
MARK Zuckerberg is staring down naysayers who hammered Facebook's stock after its debut two years ago.
Facebook shares were poised to reach a new high yesterday after the social network topped its record close from March of US$72.03 in extended trading. The company showed again that mobile advertisements are powering revenue and profit.
Facebook on Wednesday posted second-quarter sales that surged 61 per cent to US$2.91 billion (S$3.6 billion), exceeding analysts' average estimate of US$2.81 billion.
Mobile promotions accounted for 62 per cent of ad sales, up from 59 per cent in the prior period. Net profit more than doubled to US$791 million, with profit excluding some items at 42 US cents a share, above the projection of 32 US cents.
The results drove Facebook shares to as high as US$75.45 in extended trading, after rising 2.9 per cent to US$71.29 at Wednesday's close in New York.
The gains underscore how far Mr Zuckerberg has brought the social network since its 2012 initial public offering, when its stock plunged on investor concern over the lack of mobile revenue.
Now that he has made ads on smartphones and tablets Facebook's core business, he is building on that foundation with a mobile network to spread the company's ads across the Web and wireless devices, as well as with video promotions and by boosting the effectiveness of ads.
"You pay up for growth as long as it doesn't become excessively overvalued, and I don't think this is," said Martin Pyykkonen, an analyst at Rosenblatt Securities.
Facebook shares have soared 173 per cent in the past 12 months, the biggest rally in the Standard & Poor's 500 Index, according to data compiled by Bloomberg.
The company trades at 77 times reported earnings, compared with a multiple of 18.4 for the S&P 500.
In contrast, other technology stocks have not recovered from a 19 per cent sell-off in the Dow Jones Internet Index that began in March.
Facebook's performance last quarter was spurred by brands and marketers paying higher prices for better-quality promotions, said chief financial officer David Wehner, who took over on June 1 from David Ebersman.
Mr Wehner said the average ad price more than doubled from a year ago, even as ad impressions declined 25 per cent over the same period.
But Mr Zuckerberg was not basking in what he modestly described as a "good quarter". Instead, he was looking ahead to the next wave.
In a conference call with investors, he warned that the company would be spending heavily for years on newer services like private messaging, virtual reality and Facebook search - without any near-term prospects of making money from them.