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Why Facebook Inc. Stock Popped Wednesday

Facebook CEO Mark Zuckerberg presents 10-year plan at F8 conference in 2016

What happened

Shares of Facebook (NASDAQ: FB) rose sharply on Wednesday, increasing as much as 7%. By 11:48 a.m. EDT, however, shares were up a lesser 2.4%. The stock's rise follows Facebook's third-quarter earnings release , which featured better-than-expected earnings per share but lower-than-expected revenue.

The stock's bump on Wednesday likely reflects a combination of the company's solid earnings growth and the increased visibility, provided during Facebook's earnings call, into management's longer-term expectations.

Facebook CEO Mark Zuckerberg presents 10-year plan at F8 conference in 2016

Facebook CEO Mark Zuckerberg. Image source: Facebook.

So what

Facebook reported third-quarter EPS of $1.76 on revenue of $13.7 billion. This compares with EPS and revenue of $1.59 and $10.1 billion, respectively, in the year-ago quarter. Revenue was below a consensus analyst forecast for $13.78 billion, but EPS blew past an average estimate for $1.47.

Facebook's higher-than-expected EPS brought a sigh of relief from investors. The company's operating costs have been climbing sharply, and management's guidance for full-year costs going into the quarter implied that the company's operating margin could have taken a big hit. While Facebook's operating margin did narrow, it didn't narrow as much as expected.

Now what

Investors were also likely pleased with some forward-looking commentary that management provided, including Facebook's expectations for messaging and its stories format to help drive the company's next wave of growth . In addition, management said it expected its trend of a narrowing operating margin to moderate beyond 2019.

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Daniel Sparks has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Facebook. The Motley Fool has the following options: short November 2018 $155 calls on Facebook and long November 2018 $135 puts on Facebook. The Motley Fool has a disclosure policy .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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