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Facebook Grows in 2014, Disappointing Guidance for 2015

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New York City, New York – (StockNewsDesk) – 10/29/2014 — Revenue and earnings of the largest social network around the world, Facebook, topped expectations. Facebook reported its results on Tuesday after hours. The profits for the third quarter nearly doubled to $806 million compared to last year’s figure of $425 million. The revenue of the company came in at $3.2 billion compared to last year’s $2.02 billion. The company said mobile advertising has played a big role in boosting profits and increasing advertisement revenue.

Growth in 2014

Users of Facebook increased to 1.35 billion up from earlier quarter’s reading of 1.32 billion and last year’s figure of 1.19 billion. Active users of Facebook increased to 864 million from the earlier quarter’s tally of 829 million and last year’s reading of 728 million. Mobile advertisement has been a booster of revenue this quarter. Mobile advertising increased to 66% compared to 62% in the earlier quarter and 49% a year earlier. Facebook has adjusted itself to the paradigm shift of changing consumer taste from desktops to smartphones. The stock price of Facebook touched an all-time high of $81.16 before the disclosure of results.

Poor Guidance

Today the share price of the company tumbled 6% as the company gave hints about the exponential increase in expenses and lower revenue for 2015. Facebook did not mention the specifics. This made investors more wary of the company’s prospects. The Chief Financial Officer of the company has, however, mentioned that expenses can go up anywhere in the range of 55% – 75% year over year. Whatsapp and Oculus are likely to attract investments. This is higher than the average increase in expenditure of 32%.

Facebook Grows in 2014, Disappointing Guidance for 2015

Acquired Companies in Losses

Facebook has spent billions acquiring companies like Whatsapp and Oculus. Revenue from these companies hasn’t been generated yet. Whatsapp has suffered losses in the millions since its takeover. According to the Securities Exchange Commission (SEC) ,Whatsapp has experienced a loss of $232 million in the first half of 2014 compared to $59 million in the first half of 2013.

Investor focus is towards the Fed comments. On the first day before the Fed Reserve meeting, complete tapering of the bond-buying might take place. This bond-buying program has pumped $85 billion into the financial system. A Fed official has said that interest rates, which are near zero levels, are a cause of concern. Adjusting the interest rates is important to meet the pre-set inflation target. 74% of the S&P 500 companies that have reported results have topped analysts’ expectations.

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