Facebook Outperforms the Rest of Tech, While Aiming to Keep Mark Zuckerberg in Control
While some giants in the technology industry are hitting snags on Wall Street, Facebook Inc. proved again on Wednesday that it's in a class by itself.
Just a day after Apple released its quarterly earnings report, ending the company's 13-year growth streak with disappointing declines in revenue, Facebook, the world's biggest social media network released its own report on Wednesday.
The contrasts in profitability and growth were stark, leading to a record high in Facebook's share price, $120 in early trading on Thursday, while at the same time that Apple's market value took an approximate $36 billion hit, according to Reuters.
Blue Chip Tech
Facebook has come a long way in profitability, user growth, and investor's opinions since its messy initial public offering about four years ago.
The company's fundamental financials continue to outperform even Wall Street analysts' bullish expectations: In the most recent quarter, Facebook's ad revenue grew by 57 percent to $5.2 billion, while mobile ad revenue grew by 73 percent year to year.
Facebook CEO Mark Zuckerberg's enthusiastic mobile strategy -- multifaceted, experimental, and sometimes controversial -- has definitely paid off. Mobile ad revenue now accounts for about 82 percent of total revenue for the company.
The company's user growth continues to be healthy as well, especially considering that at the end of last year, 1.55 billion users -- or one-seventh of all humankind -- was already actively using the platform on a monthly basis.
For this quarter, chalk up another 100 million users, making 1.65 billion people the total active monthly user base for Facebook now.
"Facebook continues to generate very high and very profitable growth," noted RBC Capital Markets analyst Mark Mahaney to clients, reported Reuters. "And we see in [Facebook] plenty of strong, secular platform growth ahead."
J.P. Morgan Securities analyst Doug Anmuth had a similar opinion, calling Facebook "in a class by itself across the combination of scale, growth, and profitability."
Keeping the Ship Straight
Mark Zuckerberg has been at the helm of Facebook since he and his friends first created it in a Harvard dorm room. And in a proposal from Facebook's board of directors to create a new class of non-voting stock, the company is strategically planning to keep it that way.
In an earnings note published on the same day as the company's outstanding first quarter financials, Facebook's board of directors -- represented by the company's General Counsel Colin Stretch -- proposed the creation of a new Class C stock to allow more investment in the company without diluting the decision-making of shareholders any further.
"For each outstanding Class A and Class B share held by our stockholders," detailed Stretch, "Facebook intends to issue two new Class C shares as a one-time stock dividend. The Class C shares will have the same economic rights as the existing Class A and Class B shares. The primary difference is that the Class C shares are non-voting."
Facebook's Class A shares are the most commonly owned by the public, which includes a vote at the company's annual shareholder meeting. Class B shares confer 10 votes, and are mostly held by higher-ups inside the company.
The proposal will be voted on at the company's annual stockholder meeting, this June 20. Assuming the measure is approved, Facebook will be basically sending 5.7 billion new shares into the investing world in a major three to one stock split -- just minus the privilege of helping to steer the company for anyone who buys the new shares.