Facebook Earnings Preview: What to Expect

It has been nearly a year since Facebook became a public company. In that time, the stock has crashed and burned and staged a significant comeback — and that was just in the first six months.

After falling to as low as $17.55 a share in early September, the stock has rebounded in fits and starts thanks to a combination of factors including CEO Mark Zuckerberg's pledge not to sell any shares for at least a year and the expiration of its stock lockup periods. But more than anything else, Facebook's stock has benefited from showing continued growth on mobile in the September and December quarter earnings reports.

Mobile, Mobile, Mobile

All eyes will once again be on mobile revenue when the company releases its March quarter earnings report on Wednesday.

"We believe investors remain heavily focused on this metric," said Arvind Bhatia, an analyst at Sterne Agee, in a note to investors this week. Bhatia estimates that Facebook will report mobile revenue of $360 million for the quarter, which would represent more than a quarter of total ad revenue, but he notes that anything less than $380 million will likely "disappoint" Wall Street. By comparison, Facebook generated $305 million in mobile ad revenue in the December quarter, or 23% of total ad revenue.

Bhatia also estimates that the number of Facebook users who access the access the social network from a mobile device will tick up slightly to 65% in the March quarter from 64% the quarter before.

Revenue Growth

Facebook's overall revenue is expected to grow as well. The consensus estimate according to analysts polled by Thomson Reuters is that Facebook will report revenue of $1.44 billion for the quarter, up from $1.058 billion during the same quarter last year, right before it went public. Much of that, according to Pivotal Research Group analyst Brian Weiser, will come from ad revenue growth driven by international expansion, the Facebook ad exchange and an increase in Sponsored Posts.

"Facebook has established extensions to existing ad products (allowing FBX ads to run on the desktop News Feed and in association with Graph search queries), launched better targeting capabilities (such as the recent launches of lookalike audiences and partner categories launched) and are likely to launch new ad products, such as video ads, as well," Weiser wrote in an investor note this week.

Progress With New Products

During the March quarter, Facebook made several other big announcements, including launching Graph Search and redesigning the News Feed and introducing. Each of these features has the potential to provide new and better ways to serve ads and boost the company's revenue. But not yet. Both Graph Search and the new News Feed have only been rolled out to a tiny fraction of users.

Facebook Home, another new product that the company rolled out in early April, received plenty of buzz, but has been slow to take off. It has been downloaded fewer than 1 million times in the Android App Store — which represents less than 1% of Facebook's total user base — and it has received lousy reviews in the store so far. Facebook also has yet to spell out exactly how it will monetize Home.

The earnings report will be released shortly after the market closes Wednesday at 4pm ET and the earnings call will take place at 5pm ET.

Source : mashable