Facebook's shares reached record levels, after gaining as much as 3 percent increase in after-hours trading Feb. 1. The uptick was driven by the company's stellar Q4 performance revealed in its earnings report.
Beating Expectation
Simply put, Facebook obliterated market projections, as it posted an incredible $8.81 billion revenue. Observers should recall that analysts have predicted that the social media company could rake in as much as $8.5 billion and no more.
The earnings are significantly ahead of the revenue posted in the same period last year. The gap constituted 51 percent, as the previous figure only involved $5.84 billion. It has also beaten last quarter's sales by 21 percent. Facebook managed to earn $7 billion in Q316.
Overall, the latest earnings report is expected to increase Facebook's total global ad revenue for this fiscal year to around $33.76 billion.
The company's gains were largely driven by an increase in mobile advertising. This platform accounted for 84 percent of the total revenue and includes sales from Apple's suite of apps such as Instagram and the social media's own video platform.
Ad Slowdown
Before the release of its Q4 report, Facebook has attempted to temper expectations by stressing that the company is experiencing a decline in payments and fees revenue.
This was also punctuated by the fact that year-over-year revenue performance is declining. In Q2, growth rate was at 59 percent, but Q3 was down with 56 percent.
The company has also announced that it is embarking on a spending spree this 2017, causing a momentary dip in its stock price last November.
Bullish Market
Despite the bad news, investors remain bullish about Facebook's prospects for 2017. A number of these noted that the company is yet to monetize products and services, which are expected to contribute further in the company's growth.
"Due to Facebook's early strength in video, massive audience, Instagram and other ancillary opportunities yet to be monetized, we see the stock reaching our $150 price target and remain buyers," Andy Hargreaves, an analyst at Pacific Crest Securities, said.
According to experts, Instagram alone is poised to generate as much as $3.64 billion this year, which is a staggering 96 percent increase from its earnings in 2016. This, of course, is not entirely surprising, as Facebook is increasingly moving to monetize the platform.
The company is also leveraging its video publishing stream by adopting the so-called "video first strategy." The idea is to put video front and center for Facebook's constellation of products. Investors should be pleased to know that at this stage, the company is already deploying strategies for this product such as the mid-roll video advertisement and the tweaks to Facebook algorithm that would increasingly surface longer and popular videos on its users' News Feeds.
