Shares of Facebook Inc. (FB) gapped higher after it smashed second-quarter estimates on Wednesday evening. With FB trading at an all-time high, can the social media giant keep up the momentum? Let’s find out.
First and foremost, Facebook demonstrated that its social network platform is still attracting plenty of users. Monthly active users (MAUs) rose 15% year-on-year to 1.71 billion, while daily active users increased 17% year-on-year to 1.13 billion. Mobile MAUs jumped 20% to 1.57 billion.
Better yet, Facebook is successfully monetizing its growing user base, particularly with mobile ad revenues, which surged 81% year-over-year. Facebook’s success with its mobile app drove a 59% annual increase in total revenue. Last quarter, Facebook brought in $6.44 billion in revenue, which beat the $6.02 billion consensus estimate by 7%.
Meanwhile, net income nearly tripled from $719 million a year ago to $2.06 billion. Adjusted earnings per share rose to $0.97. Analysts were expecting $0.82 EPS, so Facebook posted a whopping 18.3% earnings surprise.
With results like these, it’s easy to see why FB shares rallied after the announcement. And Facebook is expected to keep up the momentum for the foreseeable future. For the third quarter, analysts are targeting 49% annual sales growth and 53% annual earnings growth. For FY 2016, the consensus estimate is for 46% sales growth and 57% earnings growth.
For these reasons and more, I consider FB a B-rated Buy. In fact, I’ve recommended it in my Blue Chip Growth newsletter since May 2014; in that time the stock has rallied 110%. But while Facebook has had quite the run, I see further upside potential.