Story Stocks from Briefing.com

July 28, 2016

1:00 pm Looking Ahead - July 29, 2016

Friday is known in the summer to be a lazy day of trading.  That may not be the case this Friday, though, with a host of important market-moving items on the docket, including the earnings results from Amazon.com, the Bank of Japan policy decision, and the advance estimate for Q2 GDP.

(1) Amazon.com Second Quarter Earnings Report (Thursday, July 28, after the close)

  • Why it's important
    • With 2015 sales in excess of $100 billion, Amazon.com provides notable insight on consumer spending activity
    • Company faces high expectations for growth in its Prime and Amazon Web Services offerings.  Failure to live up to those expectations could lead to a material decline in the stock or, conversely, a material gain if high expectations are exceeded.
      • Shares of AMZN are up 9% from their post-Brexit low and up 56% from their February 2016 low
    • Amazon.com is one of the largest companies in the S&P 500 by market capitalization and one of the most influential momentum stocks, so it carries market-moving potential
    • Amazon.com set a high bar for itself with its blowout first quarter earnings report
    • Company has a reputation for being an industry disruptor with competitive pricing and heavy investment aimed at quickly gaining market share in new verticals

  • With 2015 sales in excess of $100 billion, Amazon.com provides notable insight on consumer spending activity
  • Company faces high expectations for growth in its Prime and Amazon Web Services offerings.  Failure to live up to those expectations could lead to a material decline in the stock or, conversely, a material gain if high expectations are exceeded.
    • Shares of AMZN are up 9% from their post-Brexit low and up 56% from their February 2016 low
  • Shares of AMZN are up 9% from their post-Brexit low and up 56% from their February 2016 low
  • Amazon.com is one of the largest companies in the S&P 500 by market capitalization and one of the most influential momentum stocks, so it carries market-moving potential
  • Amazon.com set a high bar for itself with its blowout first quarter earnings report
  • Company has a reputation for being an industry disruptor with competitive pricing and heavy investment aimed at quickly gaining market share in new verticals

  • What Amazon.com's said when it reported first quarter earnings in April
    •  Sees second quarter revenues in the range of $28.0 billion to $35.0 billion and operating income between $375 million and $975 million
      • Guidance includes approximately $825 million for stock-based compensation and other operating expense (income), net.  It assumes, among other things, that no additional business acquisitions, investments, restructurings, or legal settlements are concluded and that there are no further revisions to stock-based compensation estimates.

  •  Sees second quarter revenues in the range of $28.0 billion to $35.0 billion and operating income between $375 million and $975 million
    • Guidance includes approximately $825 million for stock-based compensation and other operating expense (income), net.  It assumes, among other things, that no additional business acquisitions, investments, restructurings, or legal settlements are concluded and that there are no further revisions to stock-based compensation estimates.

  • Guidance includes approximately $825 million for stock-based compensation and other operating expense (income), net.  It assumes, among other things, that no additional business acquisitions, investments, restructurings, or legal settlements are concluded and that there are no further revisions to stock-based compensation estimates.

  • What's in play?

    • AMZN

    • Related competitors
    • Shipping companies
    • Related ETFs
      • PowerShares QQQ Trust (QQQ)
      • SPDR S&P 500 ETF (SPY)
      • iShares US Technology (IYW)
      • Technology Select Sector SPDR ETF (XLK)
      • Consumer Discretionary Select Sector SPDR (XLY).... AMZN is top holding at 12.39% of assets
  • AMZN

  • Related competitors
  • Alibaba Group (BABA)
  • Apple (AAPL)
  • Microsoft (MSFT)
  • IBM (IBM)
  • Alphabet (GOOG)
  • Netflix (NFLX)
  • eBay (EBAY)
  • Wal-Mart (WMT)
  • Best Buy (BBY)

  • Shipping companies
  • UPS (UPS)
  • FedEx (FDX)

  • Related ETFs
    • PowerShares QQQ Trust (QQQ)
    • SPDR S&P 500 ETF (SPY)
    • iShares US Technology (IYW)
    • Technology Select Sector SPDR ETF (XLK)
    • Consumer Discretionary Select Sector SPDR (XLY).... AMZN is top holding at 12.39% of assets
  • PowerShares QQQ Trust (QQQ)
  • SPDR S&P 500 ETF (SPY)
  • iShares US Technology (IYW)
  • Technology Select Sector SPDR ETF (XLK)
  • Consumer Discretionary Select Sector SPDR (XLY).... AMZN is top holding at 12.39% of assets

(2) Bank of Japan Policy Decision (Thursday, July 28, after the close)

  • Why it's important
    • The meeting comes on the heels of the FOMC decision and it is expected to offer a fresh reminder that the Fed and the BOJ are on different policy glide paths
    • The BOJ surprised market participants in January by taking its uncollateralized overnight call rate into negative territory.  That move was not received well since it was considered to be an adverse development for bank profitability and a worrisome signal about the economic outlook.
    • The Japanese yen has strengthened noticeably since the move to negative rates.  That strength has defied conventional wisdom and has reflected a lack of faith in the BOJ's policies.  Safe-haven positioning has exacerbated the yen's strength, which is driving inflation rates away from the BOJ's inflation goal and fostering expectations that the BOJ will need to introduce more policy stimulus.
    • The BOJ is under political pressure to help promote stronger growth in the Japanese economy, something the government is aiming to do with a reported 28 trillion fiscal stimulus plan.  A lot of chatter in the press in recent weeks has raised the market's conviction in the idea that the BOJ will announce some new element of monetary stimulus at the July meeting.
      • Holding the line on stimulus would be regarded as a disappointment and would presumably lead to a spike in the yen, which would be an adverse development for Japan's stock market and a disinflationary force

  • The meeting comes on the heels of the FOMC decision and it is expected to offer a fresh reminder that the Fed and the BOJ are on different policy glide paths
  • The BOJ surprised market participants in January by taking its uncollateralized overnight call rate into negative territory.  That move was not received well since it was considered to be an adverse development for bank profitability and a worrisome signal about the economic outlook.
  • The Japanese yen has strengthened noticeably since the move to negative rates.  That strength has defied conventional wisdom and has reflected a lack of faith in the BOJ's policies.  Safe-haven positioning has exacerbated the yen's strength, which is driving inflation rates away from the BOJ's inflation goal and fostering expectations that the BOJ will need to introduce more policy stimulus.
  • The BOJ is under political pressure to help promote stronger growth in the Japanese economy, something the government is aiming to do with a reported 28 trillion fiscal stimulus plan.  A lot of chatter in the press in recent weeks has raised the market's conviction in the idea that the BOJ will announce some new element of monetary stimulus at the July meeting.
    • Holding the line on stimulus would be regarded as a disappointment and would presumably lead to a spike in the yen, which would be an adverse development for Japan's stock market and a disinflationary force

  • Holding the line on stimulus would be regarded as a disappointment and would presumably lead to a spike in the yen, which would be an adverse development for Japan's stock market and a disinflationary force

  • A closer look
    • The BOJ uncollateralized overnight call rate had been held at 0.10% since December 2008.  In January, however, the decision was made to drop it to -0.10%.
  • The BOJ uncollateralized overnight call rate had been held at 0.10% since December 2008.  In January, however, the decision was made to drop it to -0.10%.

 

View photos
  • What's in play?

    • Japan ETFs
      • iShares MSCI Japan (EWJ)
      • Japan Hedged Equity Fund (DXJ)
      • MSCI Japan Hedged Equity Fund (DBJP)
      • Currency Hedged MSCI Japan ETF (HEWJ)

    • Regional ETFs
      • iShares China Large-Cap (FXI)
      • iShares MSCI South Korea Capped ETF (EWY)
      • iShares MSCI Taiwan ETF (EWT)
      • MSCI Australia ETF (EWA)
      • iShares MSCI Singapore ETF (EWS)
      • MSCI All Country Asia ex Japan Index Fund (AAXJ)

    • Currencies
      • USD/JPY
      • EUR/JPY

    • Japanese Government Bonds

    • Treasuries

    • S&P futures
  • Japan ETFs
    • iShares MSCI Japan (EWJ)
    • Japan Hedged Equity Fund (DXJ)
    • MSCI Japan Hedged Equity Fund (DBJP)
    • Currency Hedged MSCI Japan ETF (HEWJ)

  • iShares MSCI Japan (EWJ)
  • Japan Hedged Equity Fund (DXJ)
  • MSCI Japan Hedged Equity Fund (DBJP)
  • Currency Hedged MSCI Japan ETF (HEWJ)

  • Regional ETFs
    • iShares China Large-Cap (FXI)
    • iShares MSCI South Korea Capped ETF (EWY)
    • iShares MSCI Taiwan ETF (EWT)
    • MSCI Australia ETF (EWA)
    • iShares MSCI Singapore ETF (EWS)
    • MSCI All Country Asia ex Japan Index Fund (AAXJ)

  • iShares China Large-Cap (FXI)
  • iShares MSCI South Korea Capped ETF (EWY)
  • iShares MSCI Taiwan ETF (EWT)
  • MSCI Australia ETF (EWA)
  • iShares MSCI Singapore ETF (EWS)
  • MSCI All Country Asia ex Japan Index Fund (AAXJ)

  • Currencies
    • USD/JPY
    • EUR/JPY

  • USD/JPY
  • EUR/JPY

  • Japanese Government Bonds

  • Treasuries

  • S&P futures

(3) Advance Estimate for Q2 GDP (Friday, July 29, at 8:30 a.m. ET)

  • Why it's important
    • The GDP report is the broadest measure of U.S. economic activity
    • Although dated (it comes out nearly a month into the current quarter), the trends seen in the advance GDP report will influence the market's thinking about the path forward for many important market drivers, namely consumer spending, business spending, trade, and monetary policy  
    • First quarter GDP increased at an annual rate of 1.1%, yet it is believed second quarter GDP will show a pickup from the first quarter, aided in particular by solid growth in personal spending
      • A number below 2.0% would still be seen as a disappointment while a number above 3.0% would be heralded as a positive surprise
    • Real final sales growth, which excludes the change in inventories, is often cited as the better basis for assessing the pace of growth
      • Real final sales growth in the first quarter was 1.3%

  • The GDP report is the broadest measure of U.S. economic activity
  • Although dated (it comes out nearly a month into the current quarter), the trends seen in the advance GDP report will influence the market's thinking about the path forward for many important market drivers, namely consumer spending, business spending, trade, and monetary policy  
  • First quarter GDP increased at an annual rate of 1.1%, yet it is believed second quarter GDP will show a pickup from the first quarter, aided in particular by solid growth in personal spending
    • A number below 2.0% would still be seen as a disappointment while a number above 3.0% would be heralded as a positive surprise
  • A number below 2.0% would still be seen as a disappointment while a number above 3.0% would be heralded as a positive surprise
  • Real final sales growth, which excludes the change in inventories, is often cited as the better basis for assessing the pace of growth
    • Real final sales growth in the first quarter was 1.3%

  • Real final sales growth in the first quarter was 1.3%

  • What's expected?
    • Atlanta Fed's GDPNow model: 1.8%
    • Briefing.com consensus: 2.6%

  • Atlanta Fed's GDPNow model: 1.8%
  • Briefing.com consensus: 2.6%

  • What's in play?

    • Treasuries

    • S&P futures

    • Fed funds futures

    • Currencies
      • USD/JPY
      • EUR/USD
      • USD/CNY

    • Index ETFs
      • SPDR S&P 500 ETF (SPY)
      • PowerShares QQQ Trust (QQQ)
      • iShares Russell 2000 (IWM)
      • SPDR Dow Jones Industrial Average ETF (DIA)
  • Treasuries

  • S&P futures

  • Fed funds futures

  • Currencies
    • USD/JPY
    • EUR/USD
    • USD/CNY

  • USD/JPY
  • EUR/USD
  • USD/CNY

  • Index ETFs
    • SPDR S&P 500 ETF (SPY)
    • PowerShares QQQ Trust (QQQ)
    • iShares Russell 2000 (IWM)
    • SPDR Dow Jones Industrial Average ETF (DIA)
  • SPDR S&P 500 ETF (SPY)
  • PowerShares QQQ Trust (QQQ)
  • iShares Russell 2000 (IWM)
  • SPDR Dow Jones Industrial Average ETF (DIA)
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11:47 am Infinera [INFN]: Q2 beats, but investors attempt to discern if Q3 warning is company specific

Fiber-optic networking firm Infinera (INFN 8.24, -4.27 -34.13%) is getting crushed today as the company reported a better than expected Q2, but expects the coming period to turn in light revenues. The stock broke through two-year lows earlier, and taps lows of the session at the moment.

Specifically, Q2 earnings per share (EPS) came in ahead of market expectations at $0.21 on revenues which rose 24.8% versus last year and also came in ahead of expectations at $258.82 million. 

The company's Product segment (about 87.9% of total revenues) reported Q2 revenues of $227.5 million, a 27.1% increase versus last year. Additionally, the Services segment (about 12.1% of total revenues) reported a sales increase of 10.3% versus last year to $31.2 million.

However, management does not expect that success to stick around much longer. On the conference call, INFN noted more broadly, 'there are concerning signs of slowing demand in the primary market we serve.' Specifically, management highlighted weakness in Chinese markets as the DWDM market is growing by 6-8% but recent estimates peg only half of said growth is attributable to China.

Further, INFN noted the completion of multiple large customers' network buildouts and challenges in the subsea business have led to some near term headwinds. Additionally, although INFN continues to make progress in metro solutions, the company is not yet realizing significant financial benefits from cross-selling metro solutions to the existing customer base.

To that end, INFN guided Q3 revenues worse than market expectations at $180-190 million. The company also expects Q3 EPS of breakeven, plus or minus 'a couple of pennies.' This mark also comes in below market expectations.

Investors are eyeing the guide as the stock continues morning weakness into the early afternoon. As many of the company's contracts have progressed over the years, select industry peers have taken the next step, offering newer and more updated platforms. Where this hurts INFN is that some of their long time customers are opting to either switch to competition, or hold out for the next iteration of the company's applications. Peers CIEN -8.21%, LITE -2.42%, FNSR -1.22%, OCLR -1.03%, CSCO -0.85% are all lower, granted the broader market also displays some modest pressure -- Dow Jones Industrial Average (-0.48%), S&P 500 (-0.24%), Nasdaq Composite (-0.04%).

10:05 am Credit Suisse [CS] Retreats Despite Return to Profit

Shares of Credit Suisse (CS 11.16, -0.47) have slumped 4.0% in the early going, responding to second-quarter results.

Credit Suisse reported second-quarter pre-tax income of CHF199 million, which was up CHF683 million from a pre-tax loss of CHF484 million in the same quarter a year ago.

The company restructured its Global Markets platform, leading to a pre-tax income of CHF154 million. De-risking in the platform resulted in a 50.0% reduction of expected quarterly pre-tax loss in the event of an adverse stress scenario. Investment Banking & Capital Markets generated a pre-tax income of CHF135 million.

The company's Wealth Management unit was credited for fueling growth amid a challenging environment. The Asia-Pacific unit attracted CHF5 billion of Net New Assets, which increased the company's regional Assets Under Management to a record.

Group operating expenses declined 6.0% to CHF4.94 billion and net income attributable to shareholders was CHF170 million. The results put the company on track to meet or exceed its cost target set for the end of 2016.

The company reported no issues with market environment in the wake of the Brexit vote, noting that it handled increased volumes while providing quality execution.

9:56 am Pioneer Natural Resources [PXD] Rallies Following Quarterly Results/Outlook

Pioneer Natural Resources (PXD 156.78 +6.06) reported a second quarter loss of $0.22 after the close yesterday, ex-non cash mark to market derivative losses, which came in above expectations. On the top line, revenues rose 22.0% year/year to $786 million, which slightly topped expectations.

In the quarter, the company produced 233 thousand barrels oil equivalent per day (:MBOEPD), of which 58% was oil; production grew by 11 MBOEPD, or 5%, compared to the first quarter of 2016, and was significantly above Pioneer's second quarter production guidance range of 224 MBOEPD to 229 MBOEPD; oil production grew by 12 thousand barrels oil per day, or 10%, compared to the first quarter of 2016; second quarter production growth was driven by the company's Spraberry/Wolfcamp horizontal drilling program.

The average realized price for oil was $41.43 per barrel. The average realized price for NGLs was $14.21 per barrel, and the average realized price for gas was $1.67 per MCF. These prices exclude the effects of derivatives. Production costs averaged $8.36 per BOE.

Outlook:
Looking ahead, production is forecasted to average 232 MBOEPD to 237 MBOEPD in the third quarter, while production costs are expected to average $8.25 per BOE to $10.25 per BOE.

Also, Pioneer is planning to increase the company's horizontal rig count from 12 rigs to 17 rigs in the northern Spraberry/Wolfcamp during the second half of 2016; the first rig is expected to be added in September followed by two rigs in October and two rigs in November; three of the additional rigs will be dedicated to drill locations being acquired in the Sale Ranch area once well locations are permitted.

The company is also...

  • Increasing the 2016 capital budget from $2.0 billion to $2.1 billion to cover the cost of the five horizontal drilling rigs being added during the second half of the year;
  • Increasing the company's 2016 production growth forecast from 12%+ to 13%+ to reflect improving Spraberry/Wolfcamp well productivity; no incremental production is expected until 2017 from the five additional rigs being added during the second half of 2016; expecting 17 rigs to deliver production growth ranging from 13% to 17% in 2017;
  • Funding the 2017 capital program with a strong investment grade balance sheet, a strong derivatives position and forecasted cash flow assuming mid-July strip prices
  • Increasing its forecasted 2016 growth rate for the Spraberry/Wolfcamp from 33%+ to 34%+ as a result of improving well productivity
  • Oil production growth is also expected to increase from 33%+ to 34%+ this year
  • The company assumes that it will continue to reject approximately 5 MBOEPD of ethane over the remainder of 2016 based on weak market conditions

9:33 am Oracle [ORCL] to acquire NetSuite [N] in a $9.3 bln deal; combines a couple of software giants

There is a huge merger today in the cloud computing space: Oracle (ORCL) announces that it will acquire NetSuite (N) for $109 per share in cash, a 19% premium from yesterday's closing price. The deal is valued at $9.3 bln, so it's a major transaction.

NetSuite is the industry's leading provider of cloud-based financials / Enterprise Resource Planning (:ERP) and omnichannel commerce software suites. In addition to financials/ERP and omnichannel commerce software suites, NetSuite offers a broad suite of applications, including financial management, Customer Relationship Management (CRM), ecommerce and retail management, commerce marketing automation, Professional Services Automation (PSA) and Human Capital Management (HCM) that enable companies to manage most of their core business operations in NetSuite's single integrated suite.

NetSuite's "real-time dashboard" technology provides an easy-to-use view into real time business information. Its software is delivered over the cloud. Its revenue has grown from $18 mln in 2004 to $741 mln in 2015.

A little history would be helpful. NetSuite's 10-K provides a lot of good information. The 1990's saw the widespread adoption among large enterprises of packaged business management software applications that automated a variety of departmental functions, such as accounting, finance, order and inventory management, human resources, professional services, sales and customer support. These sophisticated applications required significant cash outlays for the initial purchase and for ongoing maintenance and support.

In addition, these applications were internally managed and maintained, requiring large staffs to support complex IT infrastructures. Most importantly, the applications generally were provided by multiple vendors, with each application providing only a departmental view of the enterprise. To gain an enterprise-wide view, organizations attempted to tie together their various incompatible packaged applications but many attempts failed, in whole or in part.

As a consequence, many large enterprises have transitioned from multiple point products to comprehensive, integrated business management suites, such as those offered by Oracle and SAP as their core business management platforms. However, suites designed for large enterprises are generally are not well suited to medium-sized businesses due to the complexity and cost. Medium-sized businesses and divisions of large enterprises have begun to benefit from the development of the cloud computing delivery model.

It's worth noting that NetSuite was the first company to provide a cloud-based integrated suite of business management applications that addresses the needs of medium-sized businesses to run the core functions of a business in the comprehensive manner that Oracle and SAP address the similar needs of large enterprises.

All elements of N's application suite share the same customer and transaction data, enabling seamless, cross-departmental business process automation and real-time monitoring of core business metrics. Businesses can deploy N's platform as a business management suite, or deploy specific applications such as financials/ERP, CRM, omnichannel commerce, PSA or HCM that can be integrated with existing application investments.

In terms of the rationale for the deal, Oracle and NetSuite cloud applications are complementary, and will coexist in the marketplace forever, according to Mark Hurd, CEO of Oracle. Oracle expects this acquisition to be immediately accretive to non-GAAP EPS in the first full fiscal year after closing.

So why do this deal? The combination provides Oracle with a much better foothold in the medium size business space and NetSuite should benefit from Oracle's global scale and reach to accelerate the availability of its cloud platform in more industries and more countries. The transaction is expected to close in 2016.

On a final note, this deal is not a complete surprise as there have been press reports and speculation in the market over the past few months that a deal was possible. SAP was seen as another potential suitor. In terms of sympathy plays, keep an eye on other enterprise software names, including Salesforce.com (CRM), although CRM is much larger than NetSuite (mkt cap of $55 bln vs $9.3 bln for NetSuite). ServiceNow (NOW $12 bln mkt cap) and Workday (WDAY $16 bln mkt cap) are also larger than NetSuite but are in the ballpark and could be targets.

9:25 am Ford [F] Dives After Earnings Miss and Cautious Guidance

Ford Motor (F 12.73, -1.11) reported disappointing earnings for the second quarter and the stock has responded by retreating 8.0% in pre-market action.

The automaker delivered below-consensus second-quarter earnings of $0.52 per share on a 5.4% year-over-year increase in revenue to $37.00 billion, which surpassed expectations.

Net income declined $190 million year-over-year to $2.00 billion while Automotive Segment Operating Margin dipped 70 basis points to 7.7%. Wholesales declined by 2,000 to 1.69 million.

The company's North American operations delivered lukewarm results with revenue increasing 2.2% to $23.80 billion. Wholesales declined by 1,000 to 815,000 and Operating Margin dipped 90 basis points to 11.3%. Pre-tax profit declined by $135 million to $2.70 billion.

The European segment continued its turnaround, generating a record second-quarter pre-tax profit of $467 million, which was up 190.0% or $306 million year-over-year. Operating margin improved by 350 basis points to 5.8% and wholesales increased by 41,000 to 430,000. European revenue grew 15.7% to $8.10 billion.

The remaining three segments-South America, Middle East & Africa, and Asia Pacific-registered pre-tax losses, totaling $338 million. Revenue for the three segments was up $200 million year-over-year to $5.10 billion. Geopolitical and economic concerns weighed on results in South American and Middle East & Africa while results in Asia were impacted by a weaker performance in China.

Ford Credit pre-tax profit declined by $106 million to $406 million.

The automaker cautioned that it has spotted risks that will present challenges to meeting its full-year guidance, but steps are being taken to deal with difficulties that may arise.

9:15 am Groupon [GRPN] to open sharply higher following Q2 beat-and-raise

Groupon (GRPN) is indicated to open approximately +28% higher this morning after the company reported better than expected Q2 results and raised its full year guidance.

The company, which is the well-known provider of local deals coupons (or "groupons"), reported that Q2 sales rose +2% to $756.0 million, which was well above expectations. On the bottom line, the company swung to a loss of ($0.01) from a profit of $0.02 in the year-ago period, but the 2Q16 loss still beat expectations by a penny.

Gross billings were down -2% year-over-year to $1.49 billion, but encouragingly, North America local billings year-over-year growth accelerated to 9% as the company "began to see the contribution of new customer cohorts acquired from our marketing investments and initiatives." Further, customer acquisition marketing yielded an incremental 1.1 million active customers in North America compared to the prior quarter, which the company said is the highest acquisition in over two years. North America had 27.9 million active customers as of June 30, 2016.

For the full year, the company raised its FY16 revenue guidance to $3.0-3.10 billion, up from prior guidance of $2.75-3.05 billion. More notably, the company raised its FY16 adjusted EBITDA guidance by a significant amount, as more of those sales dollars are expected to fall to the bottom line. For FY16, the company now sees adjusted EBITDA of $140-165 million, compared to prior guidance of $85-135 million.

During last night's conference call, GRPN's CEO stated that: "After three quarters of transition and intense focus on our four strategic priorities, we're improving the core business and seeing sustained progress, evidenced by our strong Q2 results." He further noted that "our core North American business continues to build momentum for our expanded customer acquisition efforts, with record local billings and growth accelerating to 9%, the highest in four quarters."

8:17 am Market Puts a Like on Facebook [FB] Q2 Earnings Report

Facebook (FB 123.34) reported its second quarter results after Wednesday's close and there was a lot to like in it -- a whole lot.  Shares of FB are trading 4.0% higher in pre-market action.

The growth the social media company reported was nothing short of amazing.  

Revenues jumped 59.2% to $6.44 billion, non-GAAP operating income surged 69% to $3.8 billion, and its non-GAAP diluted earnings per share soared 94% to $0.97.  The company's GAAP results, though, were every bit as impressive.

The impressive growth was driven by a 63% increase in advertising revenue to $6.2 billion, with mobile advertising accounting for approximately 84% of advertising revenue versus 76% last year.

The latter goes to show how important smartphone use is for Facebook.  To that end, Facebook said monthly active users were up 15% to 1.71 billion and that mobile monthly active users increased 20% to 1.57 billion.  Daily active users reached 1.13 billion, up 17%, while mobile daily active users were 1.03 billion, an increase of 22% from the same period a year ago.

Those strong growth rates are why advertisers will likely keep allocating more of their ad spending to mobile platforms, which is where consumers are an increasingly captive audience.

Facebook, to be sure, is in as good a position as any to capitalize on that spending shift.  The company said on its conference call that it expects the main drivers of advertising revenue growth to continue throughout 2016 and, in perhaps the understatement of the week, said it has been pleased with the strength of advertising revenue in the first half of the year.

The company warned, however, that it faces tougher comparables as the year progresses due to the accelerating revenue growth rates it experienced in the second half of 2015.

Those tough comparisons are a good problem to have, yet they could give some investors some pause in the near term knowing that the stock ran sharply ahead of the report, gaining 14% from its June 27 low and 18% since the start of the year. 

At Wednesday's closing price, FB trades at roughly 40x trailing twelve month earnings and 27x projected 2017 earnings.  Those P/E multiples might look high compared to the broader market, yet they are not outlandish when taking into account the kind of growth Facebook has delivered and is expected to continue to deliver.

Several analysts have raised their price targets on the stock after the glowing second quarter report and understandably so. Facebook continues to demonstrate deft execution in a fast-moving environment and is providing a lot to like about its performance.