Facebook’s revenue growth beat Wall Street’s expectations, but “the social media giant warned of “significant uncertainty” ahead,” The Information reports.
Numbers To Consider:
- Q4 ad revenue grew 31% to $27 billion, compared to the previous year. Revenue from other sources improved 156% to $885 million.
- Daily users of the main Facebook app increased 11% to 1.84 billion on average in December. Daily users on Facebook’s full collection of apps (Instagram, WhatsApp) improved by 15% to 2.6 billion.
- Facebook’s net income rose 44% to $12.7 billion.
Why It Matters: The numbers look great, but due to “looming ad tracking changes by Apple and other regulatory hurdles,” Facebook has a lot to overcome to maintain its momentum.
Part of that has to do with Apple’s new privacy rules, which “will make it harder to track users across apps on the iPhones. Facebook expects to start feeling the fallout of these changes in late Q1.
- Mark Zuckerberg: Apple has “every incentive to use its dominant platform position to interfere with how our apps work to favor their own, which they regularly do.”
- Facebook is also facing European issues regarding the legality of U.S. firms’ ability to transfer data outside of the region.
Looking Ahead: “Facebook expects its yearly revenue growth rate of 22% to “remain stable or modestly accelerate” throughout 2021. It also authorized additional share buybacks of up to $25 billion.”
Facebook ($FB) is an amazing business trading at a steal. It has high growth, amazing margins, great defensive moat, innovative team, and is trading for 12.6x forward EBITDA. Yet the stock is suppressed by concerns about antitrust and free speech regulation, as well as lost advertising revenue from Apple’s ecosystem decisions.
As a victim of iMessage myself, I understand the argument that Apple unfairly wields its ecosystem power. It will be interesting to see if other companies can chip away at their unapologetic actions and gatekeeping.