Facebook shares rise despite whistleblower document dump

Yahoo Finance's Brian Sozzi, Brian Cheung, and Julie Hyman break down Facebook's latest earnings report, and outlook for the tech giant.

Video Transcript

JULIE HYMAN: First, we got to get to those Facebook numbers. The numbers were interesting. The context was interesting. Everything that's swirling around Facebook is interesting right now as well. So let's run through the numbers real quickly here first of all.

The company's earnings per share did come in $0.05 above what-- actually, there I'm seeing that it's below what analysts had estimated. I saw that it beat. But in any case, revenue definitely came in below what analysts had been estimating, and the company's forecast for fourth quarter sales is below what had been estimated as well.

Analysts seem to be taking heart from an expanded buyback authorization of $50 billion after the company bought back about $14 billion of its shares in the third quarter, and also daily active users, which continue to show better growth than had been estimated. Daily active users rising to 2.81 billion 2.77 billion is what analysts had been predicting there.

A lot of the conversation around the agedness of Facebook users and how they have been steadily migrating upward, instead of the teens and younger people that Facebook wants. They're going to be trying to rejigger things to reorient there. And Mark Zuckerberg on the call also sort of defending the company against this huge document dump that has been coming out illustrating many of the inner workings of Facebook. Brian Sozzi, there's a lot to choose from when it comes to this discussion. Where do you want to start?

BRIAN SOZZI: I'll start here. I'll start on the stock price because it wasn't pretty, I would say, fundamentally from Facebook. And I think while you're seeing the stock price rise, and you briefly mentioned it, Julie, a $50 billion stock buyback plan. And also Facebook bought back $14.5 billion of stock in the most recent quarter. So a lot of financial firepower here about to be unleashed, or continuing to be unleashed by Facebook to support a stock that is not-- really has been dead money for many months given all these concerns.

Because having said that, if you were focused on the fundamentals of Facebook's quarter here, first revenue miss in two years in large part because of that iOS 14 update. The outlook in terms of guidance, and you have Facebook guiding to $91 to $97 billion in total expenses next year. The Street was looking for about $86.5 billion here.

Major pickup in Capex as Facebook supports the initiative of Mark Zuckerberg to expand to the metaverse, which I'm very excited about eventually going into. I don't know what I need to enter the metaverse. Nonetheless, I'm very excited to get there at some point because Facebook is going to spend a lot of money to ensure you, me, and Brian Cheung eventually go into the metaverse and, I don't know, talk to each other or go out and buy new shirts.

BRIAN CHEUNG: Soz, you're animated enough already. I feel like we don't need a metaverse version of Brian Sozzi. But I mean, your point is definitely really salient on the iOS 14 bit. This was the real big catalyst for the shared-- the downwards pressure on the shares of Snap last week when they reported their earnings. And actually, Sheryl Sandberg saying on the call that she would have seen positive quarter over quarter growth in their revenue if it were not for that single change made by Apple.

Now, for what it's worth, it's not like the revenue was severely impacted on a quarter over quarter basis because of that. It was basically sideways at around $29 billion. But what is going to be interesting is that when we look forward to next quarter, the fourth quarter, Facebook's actually going to start disclosing their financial metrics for their Facebook Reality Labs, which should cover a lot of these metaverse related revenue lines that they want to open up soon. So that's going to be a big focal point.

But just to kind of go back full circle to the point that Julie made, obviously the big narrative that's looming over this company is the document leak, and Mark Zuckerberg actually pretty forcefully saying in his opening remarks that he thinks that the leaked documents are being used to quote "paint a false picture of our company." And he was also saying that really the complex issues that Facebook is seeing is being seen across the industry as well, using the defense of well, it's not just us. It's really everyone else in the space too, which I'm not sure is really that defensible when you're the giant, really, in the tech space. But certainly worth noting as a kind of tonal, I guess, tone from the top, if you will, from Facebook.

JULIE HYMAN: Well, and he didn't just say it's everybody else in the space. He basically said, it's society. It's not just us. These are societal problems, and we're not doing anything to make them worse than they already are, which also totally-- I don't know. I don't know if that quite did the job here.

It's also interesting when you consider that commentary paired with the idea that they're going to be investing a lot in not just on the metaverse, but targeting younger users. They're targeting younger users while at the same time sort of distancing themselves, or disavowing blame, for exacerbating some of the-- yes, of course, there are societal ills out there, but he's basically saying, we're not making that worse.

Mm. I don't know if he can sort of stake that position, especially after all of the documents that have come out. But the point is, if they are spending more on trying to attract these younger users, if they're spending more on the metaverse, we have certainly seen other big tech companies take reinvestment cycles. I think Amazon is one of the biggest examples of this. And the market has tended to be patient with them because they've seen those investment cycles pay off.

Facebook, we'll see if there is going to be that level of patience. I mean, earlier we saw the shares up more. Now they're only up by 6/10 of 1%, Soz.

BRIAN SOZZI: Yeah, and if you really want to go back and look what happened to Snap last week, really stinks that they had to report first if you're a Snapchat shareholder because that-- really, problems with the iOS 14 that they called out was really priced into Facebook stock coming into this earnings report.

But if you are inclined to trade a Facebook, a Snap, a Twitter, which reports later on today, I believe, Facebook is looking like it's out in front of these iOS issues more so, or addressing them more so, than a Snap and Twitter, whether that's because of their scale, whether that's because they have more workers and they could put more people to addressing this, whatever it is. Facebook looks like it's the winner coming out of this quarter, believe it or not.

JULIE HYMAN: Well, we'll see if the shares hold up and bear that out as well. And we're also going to be talking to Mark Mahaney in the next hour about those Facebook numbers and look ahead as well to some of the other companies that are going to be reporting.