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Facebook (FB) Q4 Earnings Preview: Revenue, User Growth & More

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Shares of Facebook (FB - Free Report) have soared since Christmas, along with much of the market. But in order for Facebook’s current surge to continue, it will likely have to impress investors with its Q4 financial results, which are due out on January 30.

Quick Overview

Facebook and its top executives, including CEO Mark Zuckerberg have come under fire for the company’s handling of user data as well as the social media firm’s role in the spread of misinformation and “fake news.” The company is not alone, as Google (GOOGL - Free Report) , Twitter (TWTR - Free Report) , and others have faced increased government scrutiny as well.

Investors began to dump Facebook not just because of bad PR. Instead, people sold Facebook stock because the firm’s user growth seems to be slowing and it has committed to spending billions of dollars to address some of the issues we discussed. Facebook expects its operating margin will fall into the “mid-30s on a percentage basis” over a more than two-year period. Last quarter, FB’s operating margin dipped from 50% in Q3 of 2017 to 42%.

Facebook stock hovered at around $148.27 a share through early afternoon trading Thursday. This represented a roughly 32% downturn from Facebook’s 52-week high, despite its nearly 20% post-Christmas run and sets up what could be a solid buying point for those high on FB stock.

Earnings & Revenue Outlook

Looking ahead, our current Zacks Consensus Estimate calls for Facebook’s Q4 revenues to jump 26.4% to reach $16.41 billion—FB’s Q3 revenues popped 33%. Meanwhile, the firm’s fiscal 2018 revenues are projected to surge roughly 36.1% to hit $55.35 billion. This would also mark a sharp downturn from 2017’s 47% top-line expansion.

Peeking even further ahead, Facebook’s fiscal 2019 revenues are expected to climb 23.7% above our 2018 projection to reach $68.47 billion.

Moving on, FB’s adjusted Q4 earnings are expected to slip 1.4% to $2.17 a share. The company’s full-year fiscal 2018 earnings are still expected to jump 19.6%. But Facebook’s adjusted fiscal 2019 earnings are projected to expand ever so slightly, 0.09%, above our current year projection.

User Growth

Clearly, Facebook’s earnings growth is expected to slow as it spends billions of dollars more than it has in the past. Meanwhile, Facebook’s size makes it more difficult to expand its top line by a large percentage.

Facebook closed the third quarter with 2.27 billion monthly active users, which marked a 10% climb from Q3 2017. The firm also estimated that more than 2.6 billion people, or roughly 30+ percent of the global population, now use Facebook, WhatsApp, Instagram, or Messenger every month.

Facebook is projected to see its MAUs in the U.S. & Canada, which accounted for roughly 49% of Q3 revenues, reach 242.9 million, based on our current NFM estimates. This would mark a roughly 1.6% jump from the year-ago period and a slight sequential improvement. Meanwhile, the company’s second most valuable market, Europe is expected to see its MAUs pop roughly 2.4% year over year to reach 378.79 million.

European MAUs are also expected to climb from 375 million in Q3, which might help inspire some investor confidence after three straight quarters of sequential declines in the region that accounted for 24% of revenues last quarter.

Meanwhile, Facebook’s MAUs in its Asia-Pacific region are projected to surge 15% to hit 952.63 million, which could match Q3’s growth. The company’s monthly active users in its “Rest of World” region are expected to climb 9.6% above the prior-year quarter to reach 758.65 million.

Bottom Line

Overall, Facebook is projected to see its total MAUs jump roughly 9.5% from 2.13 billion in the year-ago quarter to 2.33 billion in Q4. Investors should be pleased to see that this projected growth would nearly match last quarter’s 10% climb and helps show that Facebook’s user data worries have not actually hurt the company’s core business that much.

It is worth noting that Facebook’s user totals “do not include Instagram, WhatsApp, or Oculus users unless they would otherwise qualify as such users, respectively, based on their other activities on.” But it isn’t likely that there is a massive discrepancy in overall user totals since one would assume Facebook would want to present the best possible data to investors at this point.

In the end, it is unclear how Wall Street will treat Facebook going forward, no matter what happens in Q4. With that said, Facebook’s share of the digital ad market, along with Google, should help it remain a top-line juggernaut for years to come.

Once Facebook’s current spending spree ends, the company runs a pretty high margin business and it holds no long-term debt at the moment, which should help it continue its augmented reality push, among others growth initiatives. And let’s not forget that Facebook plans to become a more legitimate streaming firm in an entrainment future that looks set to be run by the likes of Netflix (NFLX - Free Report) , Amazon (AMZN - Free Report) , Disney (DIS - Free Report) , and maybe even Apple (AAPL - Free Report) .

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