3 Things To Look For In Facebook’s Report

(Photo Credit: Charis Tsevis) 

Along with some major tech companies including Twitter (TWTR), LinkedIn (LNKD) and Yelp (YELP), Facebook (FB) will also report its FQ2 ’15 figures after the closing bell tomorrow. Year-to-date (YTD) Facebook’s stock has outperformed the NASDAQ with a capital return of 20.70% compared to the index which has appreciated by 6.41%.

For the upcoming quarter, the Estimize community is predicting an EPS figure of $0.49 compared to Wall Street’s forecast of $0.47. Estimize also has a higher revenue prediction of $4.029B versus Wall Street’s estimate of $4.005B.

 

Leading into the result, market participants continue to be enthusiastic about Facebook’s Instagram business. With over 300M users currently using Instagram, the opportunity for this business segment to deliver strong revenues for Facebook is very real. Advertisers are now able to access data from Facebook profiles in order to fully tailor their advertising campaign depending on each individual. In a world where customized advertising and programmatic advertising buying is becoming integral to the marketing landscape, this offering is highly desirable to advertisers.

Market participants will be paying close attention to user engagement figures when Facebook releases its results tomorrow afternoon. The two important numbers which are critically analyzed are the average monthly active users (MAUs) and the daily active users (DAUs). Facebook’s user engagement numbers have recently experienced a bullish uptick with last quarter recording an increase in average time per day spent on the Facebook site and also growth in DAUs outpacing MAUs. 

With mobile generating circa 73% of all revenues for Facebook, the continuation in innovation of product offerings is critical for the ongoing success of Instagram and Facebook. Investors will be interested to learn more about the upcoming offerings Facebook intends on launching. 

Importantly, since Facebook’s debut on the stock exchange in 2012, the company has only missed sales and earnings expectations as set by Wall Street on one occasion. Given its track record, Facebook will likely need to beat expectations and report solid user engagement figures in order to maintain its share price momentum. Further, Facebook’s stock is currently trading on price-to-sales ratio (TTM) of over 19X relative to its five year average of 15.3X, therefore if Facebook disappoints on the top line, share price weakness may be inflicted on shareholders in the short term.