By all ordinary meters,
had a solid second quarter. It beat earnings and earnings expectations when it reported late Wednesday, increasing the amount of money it earns from each user and ending June with approximately 3.5 billion people using one of its platforms.
But it wasn’t enough, and it didn’t come close to the blowout revenue reported by internet advertising rivals like Alphabet (ticker: GOOG). Facebook (FB) shares fell 3.8% to $359.11 in afternoon trading.
UBS analyst John Hodulik said in a note that the revenue outperformance “looked underwhelming” as peers such as Snap (SNAP) and
(TWTR) exceeded expectations by much larger margins. Hodulik attributed the disappointing results to the fact that Facebook has fewer large brand advertisers, which means fewer huge budgets.
created in April that limit Facebook’s ability to track people browsing the web with Apple devices.
Citi Research analyst Jason Bazinet and BMO Capital Markets analyst Daniel Salmon also noted that investor expectations were high heading into Wednesday.
The company’s outlook was also not very positive. Chief Financial Officer David Wehner said the company would experience more revenue damage in the third quarter from Apple’s (AAPL) tracking changes, making Facebook ads less effective on Apple’s mobile devices.
Wehner predicted that sales growth in the second half of the year would slow modestly from levels seen in the second half of 2019, before the pandemic skewed the comparison base.
At least some investors don’t take Wehner’s warnings about the future as serious as they ever did. Mitch Rubin, chief investment officer of RiverPark Funds, a long-time Facebook shareholder, said Wehner’s comments could be cryptic and general enough to allow for pessimistic conclusions, which have not materialized in the past.
“We take his negativity with a grain of salt,” Rubin said.
What is the metaverse and why is Zuckerberg talking about it?
Facebook CEO Mark Zuckerberg has long discussed the importance of virtual and augmented reality in earnings talks and other public forums. More than once he has called VR and AR the future of computers. The Facebook Reality Labs unit and products like the Quest 2 VR headset help Facebook take advantage.
Zuckerberg doubled down on that vision during Wednesday’s conference call, outlining his vision for the future of the Internet, which he described as the “metaverse.”
“It’s a virtual environment where you can be present with people in digital spaces,” Zuckerberg says. “You can think of this as an embodied internet that you are in, rather than just looking at it. We believe this will be the successor to mobile internet.”
Zuckerberg’s comments don’t provide much detail for financial analysts to dig into, though it’s clear the CEO plans to bet some of Facebook’s future on the metaverse ideal.
The lack of clarity didn’t bother Rubin. He said he was pleased that Zuckerberg has an eye for innovation, especially since Facebook stocks are cheap. “You get all that for free by having a company below market value,” he said. ‘Isn’t that what they get? Fantastic. But we are not paying for it.”
Write to Max A. Cherney at firstname.lastname@example.org