Facebook beat analyst expectations when it revealed its quarterly earnings report on Tuesday, reporting $3.2 billion in quarterly revenue at $0.43 earnings per share. The social media giant also reported a 7% increase in daily active users from the previous quarter, and a 5% increase in growth on its mobile platform, both key metrics.
However, Facebook shares slipped nearly 10% in post-earnings call after hours trading, with the stock reaching as low as $72.88. As of 12:30 p.m. in New York, Facebook shares had recovered to $75.78. There are three alleged culprits: worries about teen engagement, disappointing revenue streams from newly acquired WhatsApp, and an outlook that forecasts higher costs associated with more M&A activity.
The worries about teen engagement stem not from what was said, but what was not said. There’s a hypothesis in the tech investing community that teenagers are using Facebook less and competitors like Snapchat more. A comment made by Facebook’s ex-CFO David Ebersman last year that specifically singled out teenagers as a declining growth segment fueled the theory and sent the stock tumbling. In declining to break consumer usage data into age segments during the earnings call, new CFO David Wehner sidestepped the issue completely.
Facebook did disclose specific information about WhatsApp, which it purchased for $4 billion in cash and $15 billion in stock earlier this year. It was revealed on Tuesday that WhatsApp lost $138 million in 2013 on $10 million in revenue, and that Facebook is allocating $15.3 billion in goodwill for the acquisition to its balance sheet. WhatsApp’s monetization lags in part because many of its users are still in their first year of using the service, a year in which they are not charged, but the road to justifying the acquisition price still looks steep.
The optics of the WhatsApp acquisition contributed to the final reason for investor skepticism: the company’s expressed intent of growing through more acquisitions, as Wehner predicted higher costs throughout the rest of the year associated with such moves in the the company’s outlook. Snapchat, a target of multiple acquisition attempts, appears to be off the table. But CEO Mark Zuckerberg now has his messaging app in WhatsApp, and has already begun to look further afield for acquisitions, with the deal to buy virtual reality headset maker Oculus a prime example.
The company’s acquisition strategy will be closely monitored and analyzed over the coming months. Facebook clearly believes it must diversify its offering to continue its success moving forward, but it is yet unclear how some of these purchases will fit into an overarching strategy.