Facebook shares rose in after-hours trading as investors overlooked weak numbers in the quarterly report but the real star on Wall Street was Tesla which topped the $US1 trillion mark for the first time ever and remained above that level at the close.
The surge – the shares jumped more than 12% on the day – came after the about to re-list Hertz rental company ordered 100,000 Tesla for its fleet.
The contract is valued at more than $US4 billion and stunned analysts who had never associated Tesla with the bulk end of the new car market.
It’s the first major Tesla (or any electric vehicle) purchase by a rental giant (three, Enterprise, Avis and Hertz control 95% of the US rental market).
Now that Hertz has moved (it is about to refloat after collapsing in the midst of the pandemic in 2020), Avis and Enterprise will be under pressure to match the orders.
The rental car industry represents 1.5 million to 2 million units a year, a significant part of new sales, so Tesla could boost production by up to 10% a year or so just to meet expected demand from the rental sector. Tesla delivered a record 241,000 vehicles in the September quarter.
The potential from the Hertz-Tesla deal for the emerging electric vehicle business (which is all about rapid growth at the moment which Wall Street loves to see) did take a lot attention away from Facebook whose numbers were those of a mature giant and not a growth stock.
Facebook’s revenue jumped 35% from a year earlier to $US29.01 billion, while net income rose 17% to $US9.2 billion, from $US7.8 billion a year ago.
The company said it expects fourth-quarter revenue of $US31.5 billion to $US34 billion. Analysts were forecasting sales of $US34.8 billion.
But growth in monthly user numbers continues to slow.
Facebook said in the third quarter it had 3.58 billion monthly users across its family of apps, up from 3.51 billion in the second quarter. This measures Facebook’s total user base across its main app, Instagram, Messenger and WhatsApp.
Facebook’s monthly user number was up 6% at 2.91 billion. That’s OK but not sort of growth Tesla is showing.
In the US and Canada, Facebook’s core markets reported 196 million daily active users, up from 195 million in the second quarter. In Europe, the number rose to 308 million from 307 million in the second quarter.
Facebook also said it is increasing its share buyback program by $US50 billion – another sign of its maturity compared with Tesla’s ‘youth’.
Facebook’s market value at the close Monday was shy of the $US1 trillion level at $US997 billion – Tesla’s was ahead at $US1.016 trillion but behind Apple, Amazon, Microsoft and Alphabet.
In its report Facebook acknowledged a hit from Apple’s new iOS privacy feature that allows iPhone users to opt out of receiving targeted advertising.
Facebook said the forecast for the 4th quarter “reflects the significant uncertainty we face in the fourth quarter in light of continued headwinds from Apple’s iOS 14 changes, and macroeconomic and COVID-related factors.”
Specifically it requires app users to actively opt-in to being tracked across other apps and websites, which helps advertisers deliver more targeted adds.
It has thrown the digital ad market for a loop, with Snap the first out to report a bigger than expected hit from the shift in its quarterly results last week – that saw Snap shares down 28% last week.
Facebook shares rose 2% (they were up more than 3% at one stage) because the revenue and earnings lines in the report were solid.
