Facebook Reports Earnings Beat, Stock Surges
Yesterday, we took a look at the market’s reaction to Alphabet’s earnings (NASDAQ:GOOGL) and previewed Facebook’s big earnings announcement for this afternoon (NASDAQ:FB). Some analysts were spooked by the market’s reaction to Alphabet: an earnings beat lead to fleeting gains that faded as the market turned down during the following day’s trading. Analysts have been generally been worried about what they perceive as investor immunity to positive earnings news.
But we noted that while narrow beats have sometimes led to modest losses for FB, beats by more substantial margins have led to reliable gains for the stock. Recent positive earnings announcements from FB, we noted, were associated with average gains in excess of 3%. You can learn more about using news-based trading to profit on earnings announcements from our totally free guide, just click the button below:
Indeed, it seems nothing about the current market environment alters this fundamental fact: investors are hungry for tangible earnings. And Facebook is surging in after-hours trading after reporting EPS of $1.69 (compared to $1.35 projected).
The active user base came in precisely in line with projections, despite fears over a “Delete Facebook” movement in the wake of the Cambridge Analytica scandal. Revenue continues to grow nicely (up 49%), with mobile ad revenue continuing to generate the lion’s share (91%) of returns for the social media giant.
The report appears to be salving investor fears that advertisers would shun Facebook in the wake of its scandal, and the stock is gaining even more than on other recent earnings beats. FB has surged over 7% in after-hours trading at the time of this writing. A sustained selloff after the Cambridge Analytica scandal has driven down the price of FB in recent months. At this lower valuation, it may have even more room to run after an earnings report being regarded as excellent all-around.
Keep checking the News Quantified blog this week as we continue our focus on profiting using earnings news. Tomorrow, we’ll explore earnings news trading strategies in more depth.