You Won't Believe Facebook Earnings! They Just Proved Why they...
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Well, Holy smokes guys. Facebook just reported what was probably the most shocking earnings of the earnings season so far. Okay, these earnings are unreal, I’m going to show you them in just a moment. All right. Now if you don’t already know, Facebook is my personal biggest investment. So it means a lot to me.
Okay, if the stock goes down huge, huge reports, horrible numbers, reports, great numbers. There’s no stock that’s going to move my wealth more than stock by Facebook. Okay, we’re just looking at the public count. Right now. We have 371 shares in that particular account alone of Facebook.
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Okay, now we’re about $19,000 on the share, so we’re doing very good cost base of 153. But needless to say, like, if whatever happens with Facebook, it matters a lot to me in terms of are we gonna see our wealth increase or decrease? Okay, so these earnings are always very important for me.
Okay, so Facebook, q2, 2019 results, let’s start going through some of these numbers. And some of them are just shocking. Okay. daily active users came in for Facebook at 1.58 7 million. All right. Now, we’re very important. It’s always very important to read the fine print of anything, because you will find out some information that is very key to you.
Okay, a lot of people think, oh, that’s Facebook platform. And that’s Instagram and WhatsApp and all these different things, right? No, that is strictly Facebook platform. Okay, that does not include Instagram, that does not include Oculus, or WhatsApp. Alright. Those numbers are strictly for Facebook platform.
And when you hear about it in that context, it’s even more amazing. Okay, monthly active users come in for Facebook at over 2.4 billion monthly active users. All right, once again, that does not include Instagram, Whatsapp or Oculus. Those are pretty shocking numbers actually extremely shocking numbers.
One, when you think about like, you would just think like everybody that has a Facebook account is like a person that already wanted a Facebook account. They already created one, right? You would just think like, like everybody has a Facebook account. No, there’s still some growth out there. And that’s not even the most shocking part of that.
When you think about everything. Facebook has been through all the bad publicity over the past two or three years, a lot of it was brought on by themselves. And a lot of it was just the media piling on. When you think about all that unbelievable, like mountain of negativity around this company.
The fact that they can still grow daily active users and monthly active users is simply shocking, simply shocking. Unreal. Okay. Now, that’s not the only thing that is pretty shocking. Okay, revenue revenue, year over year, q2 2018, they did $13.2 billion in revenue, this most recent quarter q2 2019 16 point 8 billion, that’s a 28% revenue number up year over year.
And that’s pretty shocking in itself, because everybody was expecting Facebook’s revenue growth to slow so they had been growing like 24 26%. And so people thought it was gonna get worse, I was gonna go down like a 24% or 22%, or 20%. And it just accelerated to 28%.
Okay, a reacceleration. In the revenue growth, that in itself is absolutely shocking. You don’t see many times where a company is expected to get worse and worse when it comes to revenue, especially a huge company like Facebook, and they actually accelerate their revenue that completely changes the entire narrative around.
Facebook stock right there because it goes from a story of the revenues decelerating to also a story where it’s like the revenues accelerating that completely changes the mindset in the investor base around Facebook, okay, we look a little deeper here, you’re gonna see revenue by user geography, very important.
And what you’re gonna find is almost every single market is increasing. Every single market is increasing for them. Okay, US and Canada up almost $2 billion year over year. Okay. If we look at the European market, 4.1 billion, this most recent quarter, 3.3 billion, same quarter a year ago, if we look at.
Asia Pacific 2.3 billion a year ago, over 3 billion now Asia Pacific, a very strong market for Facebook in terms of growth, and then rest of world 1.3 billion in the same quarter last year. And they just did 1.6 billion. So as a company that is growing across the board, okay, not only are they growing users, but they’re growing revenue everywhere.
Okay, Asia, rest of the world, Europe, US and Canada. It doesn’t matter across the board. They are growing, growing, growing company. Okay. Now this next thing I’m about to show you. This is why I believe Facebook will be the most valuable company in the world within three to four years.
This is why Okay, let me show you this right here. This shows you the average revenue per user. Okay, otherwise known as ARPU, this is very, very important. This is a very, very key to understanding Facebook, okay. It’s not just about growing users or growing revenue numbers is average revenue per user, very important metric to look at.
So worldwide, this number has gotten to $7.05 Now, keep in mind at the same time last year, it was at $5.97. That’s over $1 more they’re getting in revenue per user year over year, okay, us in Canada is now at a place where $33.27 is the average revenue per user compared to about less than $26.
The same time last year, if you look at a European market, okay, $10.70 average revenue per user, and its most recent quarter $8.76, a year ago, Asia Pacific $3.04, most recent quarter $2.62, the same time last year and rest the world came in $2.13 versus $1.91.
The same time last year, okay. Now, first off here, average revenue per user is increasing, increasing, increasing and showing no signs of slowing down anytime soon. This right here is why I believe Facebook will be the most valuable company in the world within three to four years because no one can really put up this type of growth year in and year out.
It has this type of scale in terms of this many customers out there. Okay. Not only is it increasing, but I think worldwide long term, we’ll get to a place where it’s doing well over $15 average revenue per user right now. It’s a seven, okay, us in Canada, I think within the next few years will be between $40 and $60 average revenue per user Europe on a longer term basis.
I think we’ll be going to somewhere where the US and Canada is right now, which is in the $33 range. Asia Pacific long term, you know, if we’re looking at four or five years, I think it’s gonna go somewhere where Europe is right now around $10.70. And rest of world long term will go to Asia Pacific, which is about $2.13 versus about $3, where it’s at now, this is such a massive, massive thing for a company like.
Facebook, it’s not just important that you’re growing users and you know, more people are using your product on a daily basis or monthly basis. But how much money are you actually making per each user? Okay, Facebook way, way, way back in the day, okay?
When a lot of us in North America jumping on the platform, this was like 2008 and 2009 2010, where a lot of us were first jumping on the Facebook platform for the first time. Okay, Facebook actually was losing money for getting us. Okay, if you were joining Facebook in 2009 and 2010, Facebook was losing money, like we cost that company money, okay?
Because they weren’t really making any revenue on us at those particular times. And we were taking up a bunch of storage and stuff with all our videos and photos were posted and text and all those sorts of things. Okay, so we were literally costing Facebook money back then. But now each new person that joins Facebook, or Facebook’s other platforms, they’re profitable people.
Okay, so it’s a big change in the business model right. Now, income from operations, very important to look at here. And once again, very important to read the fine print, you might say, what the heck, how did their income from operations decrease year over year from 5.8? billion to 4.6? billion? How is that possible in revenues up huge?
Well, guess what, they took a $2 billion charge in this latest quarter, because of the whole FTC settlement was basically if you didn’t know, Facebook had to pay the FTC or the US government, let’s just call it that $5 billion. Let’s hope we actually as a citizens get to use that $5 billion somehow, okay, but need to say Facebook had a payout that $5 billion $2 billion hit had it come in this latest quarter.
So needless to say income from operations would have been up if it wasn’t for that one time charge of $2 billion. Okay, net income. Once again, you might say what the heck, how’d that decrease year over year from 5.1 billion to 2.6 billion? Well, once again, they had that $2 billion legal expense in there, plus another $1.1 billion, one time charge in income taxes due for developments and a case that they were involved with.
So needless to say they had these one time things that obviously were huge money things and it kind of hurt the company’s profitability here in the short term for this quarter, you take out those one time costs, and this was what the you know, a very substantial number of in all these metrics, okay, diluted earnings per share at once again, it would have been $1.08 higher than where it came in at.
So when you’re looking at income, from operations, net income, diluted APS, everything would have been much, much greater if they didn’t have to take those one time costs. Okay. And it’s keep in mind capital investments, they’ve raised capital investments quite substantially continuing to, although.
I will say that rate is slowing, and that’s a good sign for Facebook, basically 3.4 billion they spent in capital investments the same quarter last year, hey, by the way, that was like a 2x. The previous year, okay, now to 3.7 billion. So basically, what that shows there is the growth in capital investments is starting to slow down.
And overall that’s a good thing for the company, because that will help them be more profitable, long term they’ve had to do so many things in relation to capital investments, hire a massive amount more employees, we’re talking 10s of 1000s more employees they employ now than versus just a few years ago because of the security situations because they got to watch the business model long term in.
Facebook’s in a position where once again, they’re gonna be the biggest company in the world court worst case scenario one of the top three biggest companies in the world within five years, as long as they just stay on the right track, and they don’t ruin everything for themselves, okay, the whole world is there, the whole world is theirs, they just have to watch things.
And that’s why they’ve had to hire mass amounts of employees and do massive amounts of capital investments to make sure a Cambridge Analytica and these data situations and these leaks and all those sorts of things don’t happen again. Okay? Now know all these great numbers, all these unbelievable numbers, a lot of them are shocking.
This may be the most shocking of them all. Okay. Listen, this. In addition, we estimate that more than 2.1 billion people now use Facebook, Instagram, Whatsapp or messenger our family of services. Every day, on average, in more than 2.7 billion people use at least one of our family of services each month.
Which basically means about a third of the planet is using, you know, one of Facebook services out there, either Facebook platform or messenger or WhatsApp or Instagram, that is unbelievable to think about in that type of scale cannot really be touched by anything. Okay? You think Amazon’s an amazing business model.
Apple has an amazing business model. Google certainly has an amazing business model. You know, Microsoft, these companies are massive companies have massive business models, and tons of people use their products every day or every month, but they can’t touch Facebook scale.
Okay? So that’s why when I look at a company like Facebook, okay, I really always think risk reward, especially if it’s my biggest investment, which Facebook is my biggest investment. So I got to think risk reward with this one. Okay. And risk downside, probably not much here.
If I’m thinking about the potential reward company with a $584 billion market cap here, right? We look at a company like Amazon, nearly a trillion dollar market cap, if I’m just thinking about these two companies, in my opinion, Facebook will be a much larger company in three to five years than Amazon, just because that is not the amount of folks using Amazon’s products each and every day each and every month.
Okay. So if I’m looking at Facebook, there’s just so much stickiness there that a company like Amazon, which has an amazing business model just doesn’t have Okay, apple, unbelievable business model a ton of customers. So very high dollar mountain products have very good gross margins, nearly a trillion dollar market cap.
If I look at this on a three to five year basis, there’s no way I see Apple being a bigger company than a company like Facebook. Okay, same thing with Microsoft, Microsoft’s the biggest company in the world that’s on the public markets market cap of nearly $1.1 trillion.
But once again, if we just think about the type of skill Microsoft’s on, versus a company like Facebook, and has that amount of people using the products day in and day out, it’s just really can’t be compared. And if you’re an advertiser, big business, small business, midsize business, you have to be advertising on Facebook, Instagram, and these different platforms, there might other things you’re doing in the future, and never mind.
Like think about a Facebook, the Libra product, the Libra cryptocurrency, think about if that’s actually a success, think about what that will do for Facebook’s business model. Regardless if the Libra cryptocurrency is successful or not. Facebook, in my opinion, will be the largest company in the world market cap wise within you know, three to four years.
If that doesn’t happen, I will absolutely be amazed. Okay. Now, if you throw in the Facebook Libra project, and that’s actually a success, then there’s definitely definitely no question in my mind, within three to four years, this will be the largest company in the world. And that’s why I choose to have it as my largest investment.
And those numbers are just shocking. When you think about everything the company’s gone through all the negativity around it, to grow these type of numbers the way they have, despite everything going on there. Think about it, no one’s had to go through anything remotely close to what Facebook has had to go through Amazon, Apple, Google, none of these companies have done a go through anything remotely close to Facebook.
And yet Facebook has gotten through it. They’ve taken their huge fines there. And they’re up up and away guys is to say I think we’ll do much better in the future than we’re already doing on that position. I think you know, this will be once again the most valuable company in the world someday in the future.
I think it will have a market cap of well over a trillion dollars in the future and we’ll just have to see how it all shakes out. But I think will do very well. So let me know down there in the comment section what you think about Facebook, the company let me know what you think about Amazon versus Facebook.
Let me know if you ever want me to do kind of a debate of like Facebook stock versus Amazon stock or Google stock versus Amazon stock or anything like that. Let me know in the comment section. Hit the thumbs up button if you enjoyed today’s video. As always, thank you for watching and have a great day.