Facebook soars as results blow past targets

(MarketWatch) Shares of Facebook surged 20% in after-hours trading as the company reported continued growth in its user base, though again at a slower rate. The stock later eased its gains but was still up 17.3%.

The Menlo Park, Calif.-based social network reported a second-quarter profit of $333 million, or 13 cents a share, compared with a loss of $157 million, or 8 cents a share, for the year-earlier period.

Revenue rose to $1.81 billion from $1.12 billion. Adjusted profit was 19 cents a share. Analysts polled by FactSet on average expected Facebook to report a profit of 14 cents a share on revenue of $1.62 billion.

The company said it now has 1.15 billion monthly active users, up 21% from the year-earlier period. Still, that’s down from 23% year-over-year growth last quarter.

Underscoring its momentum in online advertising, Facebook reported that its mobile-ad revenue now made up 41% of total ad revenue, up from 30% the previous quarter.

In a statement, Chief Executive Mark Zuckerberg said: “We’ve made good progress growing our community, deepening engagement and delivering strong financial results, especially on mobile.”

Facebook’s mobile-ad business again showed strong momentum. That business is now 41% of total ad revenue, up from 30% the previous quarter. That’s also better than consensus estimates, Wedbush analyst Michael Pachter told MarketWatch.

“The magnitude of the revenue upside makes the mobile number very impressive,” he said.

Facebook said it has “surpassed 1 million active advertisers” on the network “driven by significant growth in local businesses.”

Pachter said that data point “makes clear that local-ad growth is responsible for the upside.”

“That makes sense, since local advertising rates tend to be much higher than national ad rates,” he said. “Of course, to the extent the ads are do-it-yourself, they’re highly profitable; if they require a sales force, they are less profitable.”

Topeka Capital’s Victor Anthony also said Facebook clearly has momentum in the advertising market.

“This was a blowout quarter and Facebook needed an outstanding quarter versus expectations for a re-pricing of the stock,” he told MarketWatch. “Judging from comments on the call, advertisers have clearly validated the platform.”

In a note, Piper Jaffray analyst Gene Munster said the report “confirms our belief that the company could see the benefit of new products in the back half of 2013 and now view estimates for the second half of 2013 as too low.”

“Longer term, we view engagement concerns as legitimate,” he said. “However, we don’t believe any shift from time on Facebook will impact the next four quarters, as we believe monetization remains low overall compared to time spent.”

In a call with analysts, Zuckerberg downplayed concerns about Facebook’s user base, including worries that teenagers were losing interest in the social network.

“There’s been a lot of speculation reporting that fewer teens are using Facebook, but based on our data that just isn’t true,” he said. “We believe we have close to fully penetrated the U.S. teen demographic for a while, and the number of teens using Facebook on a daily and monthly basis has been steady over the past year and a half.”