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Facebook (FB) to Report Q4 Earnings: What's in the Cards?

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Facebook (FB - Free Report) is set to report fourth-quarter 2020 results on Jan 27.

For the quarter, Facebook expects DAUs and MAUs to be flat or slightly down in the United States and Canada, sequentially.

The company expects ad-revenue growth on a year-over-year basis to be more than the third quarter’s growth rate, driven by continued strong advertiser demand during the holiday season. Strong demand for Oculus 2 is expected to boost other revenues.

Notably, the Zacks Consensus Estimate for revenues is pegged at $26.29 billion, indicating an increase of 24.7% from the year-ago quarter’s reported figure.

Additionally, the consensus mark for fourth-quarter earnings is pegged at $3.21 per share, having been revised 0.3% upward in the past 30 days, indicating 25.4% growth from the figure reported in the year-ago quarter.
 

Facebook, Inc. Price and EPS Surprise

 

Facebook, Inc. Price and EPS Surprise

Facebook, Inc. price-eps-surprise | Facebook, Inc. Quote

 

Notably, the company’s earnings missed the Zacks Consensus Estimate in one of the trailing four quarters while beating the same in the other three, the average surprise being 16.3%.

Let’s see how things are shaping up for the upcoming announcement.

Digital Shift to Boost Y/Y Ad Sales

Facebook witnessed jump in the usage of its services like Messenger, Instagram and WhatsApp in the third quarter amid coronavirus-induced lockdowns and shelter-in-home guidelines. The momentum is expected to have continued in the to-be-reported quarter.

The Zacks Consensus Estimate for fourth-quarter MAUs worldwide is pegged at 2.776 billion, suggesting 11.1% growth from the figure reported in the year-ago quarter. Moreover, DAUs worldwide is pegged at 1.840 billion, indicating 11% growth from the figure reported in the year-ago quarter.

Moreover, an improved ad-spending environment as well as accelerated digital shift is expected to have driven Facebook’s ad revenues in the to-be-reported quarter. The company’s top-line growth is likely to reflect improving market share gain, driven by growing user base and continuing innovation in ad product.

Further, Facebook is expected to have benefited from coronavirus-induced accelerated shift in consumer demand for e-commerce services as the platform added a number of small and medium businesses (SMBs) in the to-be-reported quarter.

The company’s initiatives to build tools and functionalities for SMBs, which are helping them to provide e-commerce services to users, is expected to have driven Facebook’s growth in the fourth quarter.

However, changes made by Apple (AAPL - Free Report) and Alphabet’s (GOOGL - Free Report) Google in their mobile operating systems and browser platforms have limited Facebook’s ability to track user-activity trend. Moreover, intensifying competition from Google, Snap (SNAP - Free Report) and Twitter for ad-dollars remains a headwind.

These factors are expected to have affected year-over-year advertising-revenue growth rate in fourth-quarter 2020.

Nonetheless, the company’s solid user base in the Asia Pacific region and growth in Instagram Stories and Feed are expected to reflect on the top line.

The consensus mark for this Zacks Rank #2 (Buy) company’s fourth-quarter advertising revenues is pegged at $25.77 billion, indicating 24.3% growth from the figure reported in the year-ago quarter. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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