Facebook has been seeing decent user base growth

Facebook might be struggling to keep a clean image, given the ongoing public relations turmoil. However, the social media giant continues to deliver strong earnings growth, consistently.





Facebook's user growth has been modest in previous quarters. However, the fact that it continues to add tens of millions of daily active users, despite its girth, speaks volumes.





Facebook was able to accelerate its core platform's user base during the third quarter, which impressed investors. Facebook had 1.62 billion daily active users at the end of the third quarter of 2019, up 2.08% from the second quarter, which represents a solid 11.68% growth on an annualized basis, which is quite impressive.





Critically, Facebook's user base in the US & Canada, its most lucrative cohort by far, saw an uptick of 3 million in Q3 to 247 million monthly active users. That number had plateaued in the last couple of years.





An increase in user base in the US & Canada is huge for Facebook, because, even a small increase in the user base in that region could lead to a surge in revenue because it makes so much more per user in the region. (more on this below).









Facebook's ARPU continues to surge

Meanwhile, the tech giant continues to see solid growth in its APRU (average revenue per user). ARPU is a monetization metric and gauges how well an internet company has leveraged its user base to generate revenue.





Facebook's ARPU has been surging in the last few quarters. That is mainly because it has been aggressively monetizing Instagram, which has over one billion monthly active users.





The company's worldwide ARPU in the third quarter was $7.26 per user, a 19.2% year-over-year growth. Facebook's ARPU in the US & Canada was a whopping $34.55 and grew a robust 25.1% year-over-year.





Facebook has also been able to grow its ARPU consistently in Asia-Pacific and in the Rest of World, which is important because most of the user base growth is coming from these regions.





However, the ARPU in these two regions were $3.24 and $2.24, respectively, which is significantly lower than the ARPU in the US and Canada.





User base growth and ARPU growth are the two factors that determine the revenue growth of a social media company. Not only is Facebook able to grow its ARPU at a fast clip, but its user base growth is also accelerating.





That and the fact that US and Canada users have returned to the core platform bodes well for Facebook.









Facebook's stock has outperformed in 2019

As a result, Facebook reported revenue of $17.65 billion, growing 29.3% year-over-year in Q3, accelerating from a previous couple of quarters, as the graph above shows.





The company posted a net income of $6.09 billion during the third quarter, up 18.6% year-over-year. While earnings beat Wall Street expectations, the net income margin has been slowly declining over the past several quarters.





However, a key point to notice here is that Facebook has consistently exceeded expectations and continued to perform well despite, fears of a slowdown after the Cambridge Analytica fiasco and after fears that regulations will slow it down.





Facebook still has some options to grow its ARPU, including monetizing the very popular "Stories" feature in all of its platforms.





Facebook's stock is up 5.4% since its Q3 earnings report in October. The stock is up an impressive 54.1% year-to-date, on the back of consistent earnings.





Facebook is currently trading at slightly elevated levels though, at ~32x trailing twelve-month earnings. That said, it is trading at much cheaper levels compared to its rivals, Snap and Twitter, which aren't really seeing breathtaking growth.

Hence Facebook's stock remains relatively attractive despite some headwinds.