Facebook’s Q3 results had a 'pretty thick silver lining,' says analyst

Facebook (FB) shares took a hit Tuesday following news Monday that it’s seeing headwinds from Apple’s (AAPL) recent iOS privacy changes and waning interest among younger consumers.

The news came after Facebook reported earnings that beat on profit but missed on revenue. While the company’s stock was down nearly 5% just before 2:30 p.m. Wednesday, MKM Partners analyst Rohit Kulkarni told Yahoo Finance Live that the social media giant’s earnings were actually better than feared.

During the company’s conference call, CEO Mark Zuckerberg announced that the firm is digging deeper into the metaverse, or persistent online worlds, by breaking out its Facebook Reality Labs as a new reporting segment. He also pointed to efforts to improve its growth prospects with teens, a group whose presence has begun to erode on Facebook.

“The tone of the management team, outlook for 4Q, and the new disclosures that they’re going to do with Facebook Reality Labs, plus the buybacks...add to a pretty thick silver lining in my opinion,” Kulkarni said.

“When you look beyond the Apple headwinds into 2022, Facebook is going to give you more disclosure, going to buy back more shares, and obviously they are going to disclose that the core business is generating a lot of cash,” he added.

Facebook reported revenue of $29.01 billion, just short of expectations of $29.45 billion, but beat on earnings, which came in at $3.22 per share versus expectations of $3.17. The company saw a 12% boost in monthly active users across its family of apps to 3.58 billion versus expectations of 3.51 billion users.

Facebook’s earnings report came after Snap (SNAP) said during an earnings call that Apple’s new App Tracking Transparency, introduced in April, hampered advertisers’ ability to track the effectiveness of their campaigns.

Apple’s App Tracking Transparency allows users to choose whether they want their apps tracking their activity across the web via their unique identifier for advertisers. Apple has introduced an alternative to that tracking, but Snap says advertisers have concerns about its limitations.

Advertisers need to know how well their ads are performing to understand if they’re spending their cash in the right places. If ads are underperforming on a platform, they may cut back on them and invest elsewhere.

Facebook, however, says that its move to build out its apps as e-commerce platforms will help make up for Apple’s privacy changes over the long term. That company also announced that it is going to make a more concerted effort to attract young adults, a demographic that has become a liability for Facebook’s future.

“We are retooling our teams to make serving young adults their north star, rather than optimizing for the larger number of older people,” Zuckerberg announced in Facebook’s earnings call.

Still, Facebook has a number of outside pressures including its fight against the Federal Trade Commission’s antitrust suit and the potential for federal legislation reining in big tech. How the company moves forward from those could have a bigger impact on the company’s future more than anything else.

And, of course, there are the whistleblower documents leaked by former Facebook employee Frances Haugen that show the company took little action on everything from the impact its apps have on the mental health of some teen girls to the spread of hate speech and human trafficking on its platforms.

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