Please ensure Javascript is enabled for purposes of website accessibility

Facebook Inc. and Under Armour Inc. Spike as Stocks Rise

By Demitri Kalogeropoulos - Jan 28, 2016 at 7:11PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

A volatile day on Wall Street today couldn't hold these stocks back from double-digit percentage gains.

Volatility continued to affect stocks as major indexes opened sharply higher this morning, dove into negative territory, and then rebounded to end the day with solid gains. The Dow Jones Industrial Average (^DJI 1.27%) rose by 125 points, or 0.8%, by the closing bell, and the S&P 500 (^GSPC 1.73%) added 10 points, or 0.5%:

^DJI Chart

^DJI data by YCharts

A rebound in oil prices pushed energy stocks higher, helping that sector lead all others in the market today. Meanwhile, fourth-quarter earnings reports sparked a few dramatic stock price swings, most notably Facebook (META 1.70%) and Under Armour (UAA 1.83%), which both surged higher in the wake of announcing their quarterly figures.

Facebook's leaping profitability
Facebook shares leapt 15% higher after the social media giant posted 52% quarterly sales growth and a huge improvement in profitability. Revenue surged as advertisers flocked to its service, which boasts stunning growth and engagement metrics, to promote their brands .

Facebook's base of daily users jumped to 1.04 billion in the fourth quarter, up 17% from a year ago. Those users are now collectively watching more than 100 million hours of video on the service, per day, executives noted in a conference call. And they're doing it almost entirely on mobile devices: Mobile ad revenue accounted for 80% of all ad revenue, compared to 69% a year ago.

The company is monetizing its growing base at a record pace. Average revenue per user (ARPU) climbed higher in every region of the world, led by the U.S. and its $13.54 result. Worldwide, Facebook's ARPU rose to $3.73 – from $2.81 last year, helping push operating margin up from 29% of sales to 44 %.

Average revenue per user by geography. Source: Facebook investor presentation.

The sharply improving revenue and efficiency results powered a doubling of net income to $1.6 billion, equating to $0.79 per share of earnings. Consensus estimates from Wall Street analysts had Facebook expected to post $0.68 per share in profit.

Under Armour's new growth markets
So much for those worries about a fourth-quarter profit and sales growth slowdown at Under Armour. The sports apparel retailer today announced that revenue improved by 31% last quarter, which was an acceleration from the 28% gain it booked in the prior quarter. That result also marked Under Armour's 25th consecutive quarter of growth at a 20% or better pace. Shares rose 23% on the day.

Image source: Under Armour.

Its core sports apparel category logged hefty gains, but the company saw its best result from footwear, which nearly doubled to $167 million of sales. That category now accounts for 18% of Under Armour's business, up from 14% a year ago.

Shoes sales are a touch less profitable, though, which was the main reason why Under Armour's gross margin slipped to 48% of sales from 50%.

UA Gross Profit Margin (TTM) Chart

UA Gross Profit Margin (TTM) data by YCharts

CEO Kevin Plank and his executive team seem to like the trade-off between slightly lower profitability and sharply higher sales. The company today forecast that 2016 revenue should grow by 25% as operating income improves at a slower pace, up 23% to $500 million.

Management is focused on developing new products to extend its reach into emerging categories while growing market share in UA's core apparel lines. "From shirts and shoes to your connected life, Under Armour will continue to be a leader in innovation," Plank said in a press release .

Demitrios Kalogeropoulos owns shares of Facebook. The Motley Fool owns shares of and recommends Facebook and Under Armour. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Dow Jones Industrial Average (Price Return) Stock Quote
Dow Jones Industrial Average (Price Return)
^DJI
$33,761.05 (1.27%) $424.38
S&P 500 Index - Price Return (USD) Stock Quote
S&P 500 Index - Price Return (USD)
^GSPC
$4,280.15 (1.73%) $72.88
Under Armour, Inc. Stock Quote
Under Armour, Inc.
UAA
$10.03 (1.83%) $0.18
Meta Platforms, Inc. Stock Quote
Meta Platforms, Inc.
META
$180.50 (1.70%) $3.01

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
400%
 
S&P 500 Returns
128%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/13/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.