Facebook, Inc. (Nasdaq: FB) will be the last of the FANG stocks to report third-quarter earnings on Wednesday after the market closes. So far, earnings season has been kind to Amazon.com (AMZN), Netflix (NFLX) and Alphabet (GOOG, GOOGL).
With Facebook stock already up more than 56 percent so far in 2017, expectations for the third quarter are high.
Wall Street analysts are expecting Facebook to report earnings of $1.28 per share on revenue of $9.84 billion. Those numbers would represent year-over-year growth of 17 percent and 40 percent, respectively.
While earnings and revenue beats would certainly be a good start for Facebook, investors will likely be looking below the surface at key advertising metrics as well. Canaccord Genuity analyst Michael Graham said he will be watching both ad load growth and ad pricing numbers closely. In the second quarter, ad load growth declined 49 percent to 19 percent, but pricing growth increased by 2 percent to 24 percent.
Graham said he will also be watching for commentary on Facebook’s planned $1 billion push into video content in 2018.
Another key metric to watch will be user growth. RBC Capital Markets analyst Mark Mahaney is expecting Facebook to report 2.03 billion global users, up 14 percent from a year ago. Mahaney says it is becoming increasingly difficult for Facebook to maintain its impressive user growth.
“In the third quarter, we expect this slight deceleration to continue again,” Mahaney wrote last week, according to Investing.com. “The law of large numbers had to kick in at some point.”
Mahaney expects Facebook to report 45 percent ad revenue growth in the quarter, down slightly from the 47 percent growth it reported in the second quarter.
On Tuesday, Deutsche Bank analyst Lloyd Walmsley said he sees no reason for investors to worry about Facebook’s ad revenue.
“We see upside bias to revenue and earnings estimates for 3Q and beyond,” Walmsley wrote, according to CNBC. “Despite Facebook’s caution of a second half 2017 slowdown due to ad impression growth, our conversations with advertisers throughout the quarter and at AdWeek suggested that strength in ad revenues should continue.”
Deutsche Bank is expecting…
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