Business World

Tuesday 20 March 2018

Facebook shares edge up after 8pc plunge

Photo: AP
Photo: AP
Peter Flanagan

Peter Flanagan

FACEBOOK shares recovered early losses yesterday, to post a small gain a day after it released fourth-quarter earnings that showed plunging revenue and profits.

The social network said net profits fell 79pc to $64m (€48m) in the three months to the end of December, as operating expenses jumped 82pc.

That outpaced a 40pc revenue gain to $1.59bn and raised concerns that margins will come under pressure.

The stock fell as much as 8pc on Wednesday night after the results were released, but edged up in trading yesterday.

The company said for the first time it now had more users on mobile than desktop computers, a trend it expected to continue. Operating expenses are expected to increase in this quarter as the company invests more in developing the business.

"Wall Street tends to be forgiving of higher spending during high-growth periods when new products are being built," said Adam Schneiberg, a portfolio manager at BTR Capital Management.

"As long as eyeballs tune in and revenue keeps growing, the Street will believe that at some point the company can flip the switch on profitability."

Facebook's increased investment is designed to help the company grapple with rising competition from larger rivals in the US market for mobile advertising.

Google is projected to grab 57pc of that market, and Facebook will remain a distant second with 12pc.

"More mobile revenue means way more spending on the operations of selling ads," said Brian Wieser, an analyst at Pivotal Research Group. "This is an expensive company to run."

Mobile contributed 23pc of total advertising revenue, up from 14pc in the third quarter.

Irish Independent

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