Facebook Operating Margin Rises by 50 Percent

facebook logoIn spite of exceptional performance in the 3rd quarter of 2017 that shocked the market analysts, the stocks of the popular social networking platform Facebook (NASDAQ: FB) remained weak at $177 levels.

According to the CEO Mark Zuckerberg, the operating expenses of the company would increase by a considerable amount in 2018 because it wants to protect the community from hate speeches and fake news. This, in turn, has made the company stocks go bearish.

But, we think that the stocks of Facebook would turn bullish because of the facts presented below. On Friday, the stocks of the company closed after trading at $179.

In Q3 2017, the company has reported revenues to the tune of $10.33 billion, an increase of 43 percent from $7.01 billion in the same period last year. The Street Consensus estimated revenues of $9.84 billion for the 3rd quarter.

In the Q3 2017 results, the overall profit was $4.71 billion as compared to $2.63 billion last year. There was a growth of 77% in earnings per share to $1.59 per share as compared to $0.90 per share in the same period last year. It has also beaten the expectation of the analysts of $1.28 per share. It is to be noted that this social networking company does not report earnings on a non-GAAP basis.

Mobile ads ruled the roost with 88% of total company’s revenue which is up by 84 percent in the earlier quarter. There was 49% growth in total advertising revenues of $10.14 billion. As per COO Sheryl Sandberg, Facebook is having 6 million advertisers at the moment. The “Instagram” social media brand of Facebook is having more than 2 million advertisers.

According to the company, the Daily Active User is 1.37 billion which shows an increase of 16 percent from 1.32 billion a year ago. Similarly, there is a growth of 16% in the Monthly Active Users to 2.07 billion which easily surpassed the analysts’ estimate of 2.06 billion.

After the Russian political ads failure, the company has announced that it is going to double the employee strength to 20,000 for maintaining the integrity of the platform. According to CFO David Wehner, the capital expenditure would become twice in 2018 as the company is spending lavishly on original content and security.

It is expected that the operating expenses would rise by 45 to 60 percent. This has triggered off the stocks of the company. But there are some positive developments that will attract the attention of prospective investors.

There is 35% rise in the average cost of advertisement while there is a growth of 10% in ad impression as compared to last year. There is a 50% growth in operating margin as compared to earlier 44% a year ago. The total employees of the company have grown by 47 percent to 23,165.

Due to the strong performance in Q3 2017, Piper Jaffray, Morgan Stanley and Baird have issued an outperform rating for the company stocks with a price target of $200. Hence the company stocks would become bullish after an impressive performance in Q3 2017, increase in operating margin and strong measures to counterattack the fake news.

Facebook Stock Price: November 20th 2017

Facebook Stock Price: November 20th, 2017

The stocks of Facebook is trading at a support level of 173. The rising MACD indicator confirms the bullishness in the stocks. Hence, the uptrend is likely to commence soon.

Based on the current situation, it would be recommended to invest in a CALL Option. One should select an expiry date of 28th November 2017 and traders should invest when the stock is trading around $177 in NASDAQ.

Rich Archer

Rich Archer

Hi, my name is Rich Archer. I am living in London. Welcome to Binary Manual. Reach to Binary Options broker reviews and market news here.


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