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Facebook, Inc.’s second-quarter earnings report is due on Jul 24, after market close. The company has been under severe scrutiny over privacy scandals of late, while its cryptocurrency launch faced mixed reviews. Meanwhile, the social media giant continues to see growing ad revenues and increased adoption of stories by advertisers. Let us, thus, take a look at what are the chances of Facebook topping estimates this earnings season —
Scandals & Antitrust Concerns Rife
Facebook continues to face a lot many hurdles, including government antitrust concerns. Due to its Cambridge Analytica scandal, Facebook needs to pay a $5 billion fine to the Federal Trade Commission (FTC). Mishandling of user information is the primary reason for such a charge.
In 2015, Facebook found that an app made by psychology professor Aleksandr Kogan at the University of Cambridge to collect users’ data with their permission violated the protocol by passing the data on to SCL and Cambridge Analytica.
Controversies related to Libra crypto coin project also continue to weigh on Facebook. Needless to say, the company’s Libra project is being ravaged by both sides of the aisle in Washington. Thanks to these, many of the company’s former employees want Facebook’s operation to get divided. President Trump even intends to sue the company over such controversies.
Still, Facebook’s shares have progressed by leaps and bounds of late. The company has easily surpassed the broader Internet - Services industry so far this year (+54.4% vs +1.8%).
The company flaunts a market capitalization of $575 billion, which makes it the fifth most valuable company after Microsoft Corporation (MSFT - Free Report) , Amazon.com, Inc. (AMZN - Free Report) , Apple Inc. (AAPL - Free Report) and Alphabet Inc. (GOOGL - Free Report) . So, what’s behind the stellar growth?
Ad Revenues & Stories Adaptation Grow
One particularly factor that’s driving Facebook is its steady growth in ad impressions. During the first quarter, management said that ad views soared 32% on a year-over-year basis. And such stellar growth is expected to reflect in the company’s second-quarter earnings. Ads are expected to be displayed on Instagram stories, Instagram feed and Facebook newsfeed.
Ad impression growth should boost Facebook’s top line, or in other words revenues or gross sales. Analysts, thus, widely expect Facebook to record revenues of $16.45 billion in the second quarter, higher than $13.23 billion reported a year ago.
Another factor that should propel revenues is the ever-increasing adoption of Facebook’s stories experiences. By the spring of 2017, stories were shown on WhatsApp, Messenger and Facebook. Since then, there are more than half-billion daily active users on stories experiences, as confirmed by CEO Mark Zuckerberg during the company’s first-quarter earnings call.
Facebook has an Earnings ESP of +0.61%, which increases the possibility of a positive surprise. This is Zacks’ proprietary methodology for determining stocks that have the best chance to surprise with their next earnings announcement. It provides the percentage difference between the Most Accurate Estimate and the Zacks Consensus Estimate.
At the same time, the Zacks Consensus Estimate for current-year earnings has trended upward over the past 60 days as estimates moved up from $7.09/share to $7.10/share.
Upbeat earnings performance, no doubt, will lead to a rally in the share price. The company’s expected earnings growth rate for the current year is a solid 9.2%.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce ""the world's first trillionaires,"" but that should still leave plenty of money for regular investors who make the right trades early.
Image: Bigstock
Facebook a Screaming Buy Ahead of Q2 Earnings
Facebook, Inc.’s second-quarter earnings report is due on Jul 24, after market close. The company has been under severe scrutiny over privacy scandals of late, while its cryptocurrency launch faced mixed reviews. Meanwhile, the social media giant continues to see growing ad revenues and increased adoption of stories by advertisers. Let us, thus, take a look at what are the chances of Facebook topping estimates this earnings season —
Scandals & Antitrust Concerns Rife
Facebook continues to face a lot many hurdles, including government antitrust concerns. Due to its Cambridge Analytica scandal, Facebook needs to pay a $5 billion fine to the Federal Trade Commission (FTC). Mishandling of user information is the primary reason for such a charge.
In 2015, Facebook found that an app made by psychology professor Aleksandr Kogan at the University of Cambridge to collect users’ data with their permission violated the protocol by passing the data on to SCL and Cambridge Analytica.
Controversies related to Libra crypto coin project also continue to weigh on Facebook. Needless to say, the company’s Libra project is being ravaged by both sides of the aisle in Washington. Thanks to these, many of the company’s former employees want Facebook’s operation to get divided. President Trump even intends to sue the company over such controversies.
Still, Facebook’s shares have progressed by leaps and bounds of late. The company has easily surpassed the broader Internet - Services industry so far this year (+54.4% vs +1.8%).
The company flaunts a market capitalization of $575 billion, which makes it the fifth most valuable company after Microsoft Corporation (MSFT - Free Report) , Amazon.com, Inc. (AMZN - Free Report) , Apple Inc. (AAPL - Free Report) and Alphabet Inc. (GOOGL - Free Report) . So, what’s behind the stellar growth?
Ad Revenues & Stories Adaptation Grow
One particularly factor that’s driving Facebook is its steady growth in ad impressions. During the first quarter, management said that ad views soared 32% on a year-over-year basis. And such stellar growth is expected to reflect in the company’s second-quarter earnings. Ads are expected to be displayed on Instagram stories, Instagram feed and Facebook newsfeed.
Ad impression growth should boost Facebook’s top line, or in other words revenues or gross sales. Analysts, thus, widely expect Facebook to record revenues of $16.45 billion in the second quarter, higher than $13.23 billion reported a year ago.
Another factor that should propel revenues is the ever-increasing adoption of Facebook’s stories experiences. By the spring of 2017, stories were shown on WhatsApp, Messenger and Facebook. Since then, there are more than half-billion daily active users on stories experiences, as confirmed by CEO Mark Zuckerberg during the company’s first-quarter earnings call.
Will Facebook Beat Earnings Today?
The Zacks Rank #2 (Buy) company is also widely expected to report $1.90 of earnings per share in the second quarter, more than $1.74 a year ago. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Facebook has an Earnings ESP of +0.61%, which increases the possibility of a positive surprise. This is Zacks’ proprietary methodology for determining stocks that have the best chance to surprise with their next earnings announcement. It provides the percentage difference between the Most Accurate Estimate and the Zacks Consensus Estimate.
Facebook, Inc. Price and EPS Surprise
Facebook, Inc. price-eps-surprise | Facebook, Inc. Quote
At the same time, the Zacks Consensus Estimate for current-year earnings has trended upward over the past 60 days as estimates moved up from $7.09/share to $7.10/share.
Upbeat earnings performance, no doubt, will lead to a rally in the share price. The company’s expected earnings growth rate for the current year is a solid 9.2%.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce ""the world's first trillionaires,"" but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>