Facebook, Tesla Provide Contrasting Earnings Results

By Glenn Dyer | More Articles by Glenn Dyer

Contrasting June quarter results from Facebook and Tesla on Wednesday.

The Facebook figures will go some way to easing nerves on Wall Street about the mega techs, but investors and analysts are waiting for the quarterly reports tonight, our time from Amazon and Alphabet (Google) before fully relaxing.

Facebook revealed another quarter of strong revenue growth despite the company’s historic $US5 billion ($A7.1 billion) privacy settlement with the US Federal Trade Commission.

The company said second-quarter revenue, (which is driven by advertising) jumped 28% to $US16.9 billion ($A24.2 billion), topping market forecasts.

Net profit slumped 49% from the same period a year earlier to $US2.6 billion, dragged down by the FTC penalty which was imposed over the way Facebook allowed Cambridge Analytica to abuse the privacy of 87 million Facebook users.

But that was ignored and Facebook’s share price approached record levels on Wednesday and was up more than 3% in after-hours trading before losing all that and closing slightly in the red.

Facebook on Wednesday said it set aside an additional $US2 billion for the FTC fine after striking a $US3 billion provision for the fine in the March quarter.

Another $US1.1 billion has been set aside for income taxes stemming from a separate legal case governing how corporate stock-based compensation (to employees and executives) is calculated and taxed.

Facebook also revealed that it is now subject to two anti-trust investigations by the US Department of Justice – one was the general probe revealed on Tuesday, another was also started earlier this month and is unrelated.

“The online technology industry and our company have received increased regulatory scrutiny in the past quarter,” Facebook said in its earnings release after the market closed Wednesday.

“In June 2019, we were informed by the FTC that it had opened an antitrust investigation of our company. In addition, in July 2019, the Department of Justice announced that it will begin an antitrust review of market-leading online platforms.”

Tesla shares plummeted in late trading after Elon Musk’s electric-car maker posted a worse-than-expected loss and backtracked from a forecast for a return to profit.

The surprise came despite a clear improvement in quarterly sales and in a smaller loss.

The maker of the Model 3 electric car said it lost $US408 million in the quarter, compared with a loss of $US718 million in the June quarter a year ago.

Sales rose to $US6.3 billion, compared with $US4 billion a year ago.

Tesla said that while it’s still looking at a third-quarter profit, it’s going to focus on delivering more cars, expanding capacity and generating cash.

In fact, the results statement was not clear on whether Tesla had reaffirmed its sales outlook for this year.

In a letter to investors announcing the results, Tesla said it was “simplifying” its approach to guidance and that it is “working to increase our deliveries sequentially and annually,” with some seasonal fluctuations, a goal “consistent with our previous guidance of 360,000 to 400,000 vehicle deliveries this year.”

Tesla’s stock plunged as much as 12% in after-hours trading. The shares were already down 20% for the year up to Wednesday’s close. They ended the post close session down 9.7%.

Glenn Dyer

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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