The following commentary was originally sent to Action Alerts PLUS subscribers on April 27, 2016, at 5:26 p.m. ET.
Facebook (FB), our largest Action Alerts PLUS holding, proved its dominance again Wednesday, posting a top- and bottom-line beat with its first-quarter results and better-than-expected user metrics across the board.
Revenues of $5.4 billion (up 52% year over year) came in roughly $150 million above consensus and EPS of 77 cents (compared with 42 cents in the first quarter of 2015) walloped consensus of 62 cents. We are extremely pleased with Facebook's performance, and while we remain focused on the long term, these results validate FB's standing as our most heavily weighted stock in the portfolio. We are not surprised to see shares ripping higher in after-hours trading.
Digging deeper into the release, advertising revenue was up 57% year over year to $5.2 billion, but as we mentioned in our preview note earlier today, we would really be paying closing attention to mobile ad revenue, which, to our delight, increased to 82% of total ad revenue (up from 80% last quarter and 73% from a year ago). The continued growth in mobile ad penetration signifies the increasing attractiveness of Facebook's mobile platform to marketers. Importantly, it demonstrates this management team's ability to execute on initiatives that allow the company to be out in front of future trends.
By geography, the company experienced year-over-year ad revenue growth in all its major regions, with U.S. & Canada, Europe and Asia Pacific all growing more than 22% compared with 1Q 2015. Average revenue per user (ARPU) also increased worldwide to $3.32 (up 12% year over year), beating consensus expectations for $3.24. U.S. & Canada, which is Facebook's highest revenue-generating region, increased ARPU by 18% to $12.43 and Asia Pacific's ARPU also increased by more than 10%.
As for user metrics, daily active users (DAUs) were 1.09 billion (up 16% year over year), mobile DAUs were 989 million (up 24% year over year), monthly active users (MAUs) were 1.65 billion (up 15% year over year) and mobile MAUs were up 1.51 billion (up 21% year over year). These also proved to be increases on a sequential basis and beat consensus estimates across the board. DAU as a percentage of MAU also increased to a record high of 66.1% (up from 65% last quarter), demonstrating increased user engagement and cementing FB as the best global ad platform.
Mobile-only MAUs (those who only access Facebook through a mobile device and do not use desktop) increased to 894 million from 823 million in the prior quarter, again showcasing Facebook's increasing mobile importance.
Separately, Facebook also announced it will issue new class C shares of stock, designed to be non-voting shares (owners of class A shares will receive two class C shares upon approval of the proposal). In short, the reasoning stems from Mark Zuckerberg's pledge to donate 99% of his shares to charity over time. By issuing a non-voting class of stock, Zuckerberg can be true to his pledge without sacrificing controlling ownership in the company. We do not believe the move will have any material impact on the stock and fully support Zuckerberg in maintaining his controlling interest. As founder and CEO, Zuckerberg has proven his ability as a true leader with a powerful vision.
The results, simply, speak for themselves. We fully embrace Facebook's continued outperformance. The ability of this management team to execute on its lofty goals is unmatched and its investments are clearly paying off.
The best part? Even though some may be wary of what may seem, at face value, as a hefty valuation, we see many more growth opportunities ahead (e.g., Live Video, Messenger, WhatsApp, Instagram, Oculus, etc.).