Own a social media stock? The big names reported this week.
Here's the short version
SNAP was down Wednesday as focus shifts more to the fact that the company once again reported losses. It's an interesting thing when a stock goes up because a company's poor earnings were better than expected, but still bad.
Revenues increased in typical fashion with big percentage gains. Total revenue rose 39% year over year to $320.4 million. From that revenue, Snap posted an operating loss of $316 million vs. a loss $392 million a year ago. Similarly, net losses were $310.4 million vs. a loss of $385.7 million a year ago.
On a diluted basis, Snap's first-quarter losses break down to $0.23 per diluted share compared to losses of $0.30 in the year-ago period, partly due to a rise in the number of shares outstanding.
I don't think much of Snap's results. Daily active users grew from the fourth quarter of 2018, but they were down a stagnant 1 million users to 190 million DAUs relative to the 191 million DAU's in the first quarter of 2018.
Even with new things like games, I think Snap's platform lacks the diversity needed to cater to a large audience.
Twitter (TWTR) stock was up big after Tuesday's announcement of big earnings in the company's first quarter. Revenues increased 18% year over year to just under $787 million. The big strength for the quarter came from the United States, with revenue growth of $432 million. That's a 25% advance year over year.
Regarding profits, Twitter reported net income of $190.8 million. That's a roughly 216% increase year over year. Earnings per share advanced a comparable 212.5% to $0.25 per diluted share.
I used to be very bearish on Twitter, and it has very much proven me wrong. The company is seemingly finally capitalizing on its revenues and creating some seriously nice earnings growth.
Moving forward, user growth will be the thing to watch. Twitter's story will only continue so long as the company is able to create the user growth necessary to keep driving advertising revenues. That's the name of the game in social media.
Twitter added 8 million daily active users in the first quarter. That's great to hear. We'll see if it continues through 2019.
Total revenue increased 26% to $15.07 billion, but expenses went through the roof, rising 80% to $11.76 billion. Those expenses were largely the result of a $3 billion expense related to legal fees that are a byproduct of drama with the U.S. Federal Trade Commission (FTC). Without those, Facebook stated that its operating margins would have been 20 percentage points higher.
Earnings per share dipped 50% to $0.85 per share. Without those legal fees, though, Facebook said that earnings would have been $1.04 higher per share. If you want to look at the company's earnings without the $3 billion legal expense, its earnings would have been $1.89 per share vs. $1.69 in first quarter 2018.
This is could be a misleading adjustment, however, as Facebook indicated that the expenses could very well rise to $5 billion when all is said and done. The probe from the FTC began after the Cambridge Analytica scandal, and could cause a record-setting fine.
Despite the warning, the stock was up 9% after hours (at the time of writing).
Revenue beat estimates of $14.98 billion, and user growth was in line with expectations.
I think the stock's climb can be explained as thus: the revenue and user growth indicate that Facebook is still growing. Looking past the short-term expenses of the potential fines from the FTC, the company retains the potential to put up big earnings gains. That's what investors are reacting to.