Today: Facebook continues to grow revenues from mobile usage, prompting investors to push stock prices to record levels. Also: New earnings reports arrive as Gilead and Electronic Arts (ERTS) rise, LinkedIn and Yelp fall.
The Lead: Facebook's mobile revenues grow, but teen exodus scares investors
Facebook shares took off after the company's quarterly earnings report showed more growth and continued mobile-revenue success, but those gains turned around violently after the Menlo Park social network admitted losing influence among teenagers.
Facebook reported net profits of $425 million, or 17 cents a share, on revenues of $2.02 billion, showing off year-over-year revenue growth of nearly 60 percent. The metric that excited investors and investors so much three months ago that Facebook stock finally moved higher than its IPO price continued to shine: The company reported that about 49 percent of its advertising revenue was derived from mobile, up from 41 percent in the second quarter.
"To see a company continue to accelerate revenue growth at this stage in the game is quite impressive," Macquarie Securities analyst Ben Schachter told Bloomberg News.
The strong financials sent Facebook shares through the roof in after-hours trading: After the stock closed with a 0.7 percent decline at $49.01, shares sold for as much as $57.98 in the first 20 minutes of late trades.
Two hours later, those gains were gone.
In their conference call with analysts, Facebook executives said they do not plan to increase the number of ads they show in users' feeds, a big reason for the revenue gains, and said it expects a higher tax rate in the current quarter. Most damaging, Facebook for the first time admitted that it is struggling to attract and retain younger users, typically the most active on social media.
Facebook Chief Financial Officer David Ebersman said Wednesday that the social network "did see a decrease in daily users, specifically among younger teens," though he attempted to couch that statement by saying that overall teen usage was "stable" and the decrease was "of questionable significance."
Ebersman's admission matches up with recent polls showing Facebook's diminishing influence with teenagers, who have reportedly flocked to San Francisco rival Twitter. If Facebook is having issues retaining teenagers' eyeballs amid competition from younger offerings such as Snapchat, it could cost the company advertisers that are looking to reach teens.
By 3:30 p.m. Pacific time, Facebook shares had fallen lower than the closing price, at $48.39.
SV150 market report: Apple gains, LinkedIn and Yelp suffer after earnings reports
Wall Street declined Wednesday after the Federal Reserve announced it would not stop its bond-buying stimulus due to a sluggish economy and waning housing market rebound, which hurt the stocks of homebuilders. Silicon Valley stocks were stable, however, as gains from Apple (AAPL) and Gilead balanced declines from social-media stocks that disappointed in their Tuesday earnings reports.
Apple gained 1.6 percent to $524.90 after admitting that "a limited number" of the iPhone 5S units it has sold suffer from manufacturing defects that affect battery life. An IDC report showed that the Cupertino tech giant continues to lose market share in a tablet battle with Android-based devices, but analysts said Apple should still be able to enjoy an "iPad Christmas," as CEO Tim Cook predicted in the company's earnings report conference call earlier this week, after reviews of the new iPad Air were stellar. Gilead and Electronic Arts also helped boost the SV150, as the two companies were boosted by their Tuesday earnings reports: Gilead established a new intraday high of $73.20 and gained 4.6 percent on the day to an all-time closing high of $72.67, while EA moved 7.8 percent higher to $26 a share.
LinkedIn and Yelp were not as fortunate after their earnings reports: LinkedIn fell 9.3 percent to $224.11 after disappointing analysts and investors with its fourth-quarter forecast, and Yelp fell 2.6 percent to $67.05. SunPower (SPWRA) fell 4.1 percent to $31.85 before its earnings report, which showed a revenue gain and helped shares improve in late trading, and Intel (INTC) lost 0.1 percent to $24.50 after a report that it is seeking to sell of its television set-top box initiative. Yahoo (YHOO) fell 1.8 percent to $32.57 and Google (GOOG) declined 0.6 percent to $1,030.42 after the two Silicon Valley companies learned that the NSA has been intercepting their data as it flowed between data centers.
Up: EA, Gilead, Symantec, Apple, Hewlett-Packard
Down: LinkedIn, SolarCity, SunPower, Pandora, Tesla, Netflix (NFLX), Zynga, Yelp, NetApp, Yahoo, Salesforce, Juniper, Adobe (ADBE), SanDisk, eBay (EBAY), AMD, Facebook, Google, Oracle (ORCL), Cisco (CSCO), VMware
The SV150 index of Silicon Valley's largest tech companies: Up 0.05 to 1,404.49
The tech-heavy Nasdaq composite index: Down 21.72, or 0.55 percent, to 3,930.62
The blue chip Dow Jones industrial average: Down 61.59, or 0.39 percent, to 15,618.76
And the widely watched Standard & Poor's 500 index: Down 8.64, or 0.49 percent, to 1,763.31
Check in weekday afternoons for the 60-Second Business Break, a summary of news from Mercury News staff writers, The Associated Press, Bloomberg News and other wire services. Contact Jeremy C. Owens at 408-920-5876; follow him at Twitter.com/jowens510.