Facebook Inc (NASDAQ:FB) reported revenue and operating income 1% and 5% above analysts estimate, with ad revenue (including mobile) in-line. According to a recent research report by Deutsche Bank, the 41% ad growth was below the heightened expectations into the quarter, but demonstrates progress for Facebook Inc (NASDAQ:FB) in newsfeed. The operating expense ramp up reduces analysts EBITDA in 2013 by 16%, but oddly the research firm view it as taking one of the uncertainties out of the picture for 2013.
Positive:
Mobile revenue doubled Q/Q to $306m, and while below expectations, analysts from the research firm continue to see a huge opportunity for newsfeed to ramp significantly from current levels in 2013. Overall ad revenue increased 43% Y/Y ex-FX, accelerating for the second consecutive quarter. Finally, EBITDA margins of 62% were up sequentially and only down 110bps Y/Y (vs. down 470bps Y/Y in 3Q12), which were partially aided by the payment revenue catch up.
Negative:
Right rail likely declined around 10% Y/Y, as desktop traffic declines and advertisers shifting budgets to news feed are more than offsetting the improved yields from new products (FBX and Custom Audiences). Facebook Inc (NASDAQ:FB) guided to 50% Y/Y opex growth ex-SBC, ahead of analysts previous estimates, driving an 800bps EBITDA margin decline in 2013. Finally, Facebook Inc (NASDAQ:FB) did not provide the same level of disclosure around ad revenue trajectory as it had in the previous two quarters.
Deutsche Bank have reduced its 2013 revenue and EBITDA by 7% and 16% respectively. Firm’s $37 PT (previously $40) is based on a 20x 2014 EV/EBITDA. Key risks include mobile monetization, lower user engagement and revenue deceleration.
Facebook Inc (NASDAQ:FB) decreased 4.58% in the pre-market trading hours to $29.81.
