Earnings Outlook: What to expect from Facebook’s earnings

Facebook is scheduled to report first-quarter earnings after hours Wednesday. Here’s what to look for:

Earnings: Analysts surveyed by FactSet expect Facebook FB, +1.29%  to report adjusted earnings per share of 41 cents, up from 34 cents in the year-earlier period.

Revenue: Facebook is expected to report sales of $ 3.56 billion, up from $ 2.50 billion in the year-earlier period. The majority of its revenue comes from mobile advertising, with the rest made up of desktop advertising and then payments and other fees.

Stock Reaction: Shares of Facebook have gained about 7% year-to-date, outperforming the S&P 500’s gain of 2%. During the past three months, Facebook has gained 8% while the S&P has gained 1.5%.

What to watch for: Analysts expect Facebook to post solid earnings, mostly due to growth in revenue from mobile and video advertising.

Mobile ads were big for Facebook last quarter as well, as the social media site beat earnings expectations, with mobile making up about 69% of fourth-quarter ad revenue, up from 53% in the previous year.

Currency may have a slight effect on earnings, with Rob Sanderson, managing director of MGM Partners, predicting $ 60 million in revenue headwind.

Beyond that, investors and analysts will be focused on user numbers, which appear to be a positive for Facebook, as well as its monetization efforts.

Facebook-owned WhatsApp said it reached 800 million monthly users in April and may reach 1 billion by the end of the year. Instagram, also owned by Facebook, has more than 300 million users, according to Sterne Agnee analysts.

At the same time, Sterne Agnee analysts note that WhatsApp has yet to figure out a model to make money, and they expect that to remain unchanged. Instagram, they say, appears to be slowly moving forward with monetization through ads and may accelerate that effort during the second half of the year.

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