Here’s Why Shares of Facebook Aren’t Soaring Even Higher

July 28, 2016, 2:43 PM UTC
Facebook Holds Its Fourth f8 Developer Conference
Photograph by Justin Sullivan — Getty Images

Wall Street just gave Facebook’s earnings the 👍.

While most tech and media companies would show slowing growth at this point in their life cycle, social media titan Facebook (FB) blasted beyond analyst expectations for yet another quarter, posting even stronger growth in its user base and mobile ads Wednesday evening.

Facebook reported that overall revenue grew 59% in the second quarter largely boosted by the company’s 63% growth in advertising revenue. Over 80% of ad sales were attributed to mobile advertising. The company’s monthly active users also grew 15% to 1.71 billion—its largest leap in over three years.

Yet shares of the company rose just 3.5% in trading Thursday, after shooting up 8% after its earnings call a day earlier.

Despite the excitement surrounding Facebook’s earnings, there’s is still a nagging sense of unease about the company’s ability to maintain such growth in the long run. Roughly 1.6 billion people are already using Facebook each month—suggesting that the company could be running out of potential users. Facebook also acknowledged that it would not be able to continually cram ads onto its website given the limited real estate and interest from users.

The company itself noted in its second quarter earnings that growth in ad revenue, which made up 97% of total revenue in the three months ending June, will slow in each successive quarter of 2016 and into 2017.


Some investors are also growing wary of Facebook’s ever soaring stock price, which has hit yet another high at $127.22 a share. Famed short seller Andrew Left of Citron Research for one, told Bloomberg that he was betting against Facebook because he believes investors expectations exceeded the company’s ability to grow over the next few years.

Granted, Facebook is fighting against these ceilings. The company is looking toward the next big thing—video and video advertising as a future growth driver. Facebook Live, the social media platforms live video streaming service, is a part of that push.

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