Facebook Inc. has been able to retain a Teflon sheen on Wall Street with a succession of blowout quarters of advertising revenue.

Neither a ravaging pandemic, economic meltdown nor antitrust lawsuit by the Federal Trade Commission have blunted the momentum of the social-media giant. And analysts expect more of the same Wednesday, when Facebook FB reports its fiscal fourth-quarter earnings.

Analysts’ gusto for Facebook is heavily rooted in sales to more than 10 million advertisers and a flourishing digital economy during the pandemic, as well as diversification into new product categories such as Instagram Reels and Facebook Shops.

To be sure, there are concerns. Antitrust and political risk remain acute, especially in light of the Jan. 6 assault on the U.S. Capitol and social media’s role in helping foment the riot. The efforts of Facebook and other social-media giants like Twitter Inc.
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to tamp down misinformation and hate speech coursing over their digital platforms also lingers. 

Facebook also faces diminished time spent on the site in the U.S., where both average visit duration and pages per visit are dropping, according to Ed Lavery, director of investor solutions at data provider SimilarWeb. He notes the average visit time in December dropped below 13 minutes for the first time since he began tracking the metric in December 2017.

Still, investors expect big gains in the fourth quarter and beyond, after the stock grew 33% in 2020 to push Facebook’s market capitalization near $800 billion. Analysts expect Facebook revenue and profit to grow nearly 25% in the fourth quarter on average, according to FactSet.

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Earlier this week, BMO Capital Markets analyst Daniel Salmon increased his revenue estimates in fiscal 2020 ($84.55 billion), 2021 ($103.1 billion) and 2022 ($126.1 billion) because of “strength in online ad spending, incremental ad demand due to commerce native functions, and higher other revenue (2022), which accounts for greater payment services revenue.” Salmon also raised EPS estimates to $9.40 in 2020 (vs. $9.29); to $9.87 in 2021 (vs. $9.58); and to $13 in 2022 (vs. $11.97).

What to expect

Earnings: Analysts polled by FactSet on average expect earnings of $3.15 a share, which would be an increase from $2.56 a share in the fourth quarter of 2019. Despite an FTC investigation into alleged anticompetitive business practices, Facebook’s estimate has risen from $2.64 a share on Sept. 30.

Contributors to Estimize, a crowdsourcing platform that gathers estimates from Wall Street analysts as well as buy-side analysts, fund managers, company executives, academics and others, are also projecting earnings of $3.15 a share on average.

Revenue: Analysts on average expect Facebook to report $26.25 billion in fourth-quarter revenue, according to FactSet, up from $21.08 billion the year before. Estimize contributors are also expecting revenue of $26.2 billion.

Stock movement: Through Friday, shares are up 26% over the past 12 months, with most of the gains coming at the start of the pandemic, when Americans were confined at home and turned to Facebook to socialize and get news. The S&P 500 index
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has increased 17% in the past year. At $777.2 billion, Facebook’s market value is more than that of media giants Walt Disney Co.
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+0.88%

and Comcast Corp.
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combined.

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What analysts are saying

— “We estimate Facebook’s 4Q total revenue will grow +28% y/y to $27 [billion], which is moderately above FactSet’s reported consensus of $26.27 billion (+25% y/y) and represents a notable acceleration.” — Stifel analyst John Egbert, in reiterating a buy rating and price target of $340 on Jan. 22.

— “We expect vertical integration for e-commerce and more server-to-server integrations for advertising to help drive a narrative about Facebook having greater control over its revenue destiny.” — BMO Capital Markets analyst Daniel Salmon, in raising his rating to outperform and price target of $325 from $270 on Jan. 19.

— “On a macro level, we expect online ad spend to accelerate in 2021, driven by a GDP-driven ad market recovery, accelerated secular shift from offline to online commerce, rollout of 5G smartphones (enabling new internet experiences), and TV cord cutting (enabling connected TV advertising).” — MKM Partners analyst Rohit Kulkarni, while reiterating a buy rating and $330 price target on Jan. 19.

— “Investor fatigue around [Facebook] is greater than for the rest of FANG, partly due to elevated regulatory concerns and also because FB has less overall business diversification than Google
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+0.45%

GOOG,
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and Amazon
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.
Lawsuits from the FTC and state AGs will now be heard by the same judge, and could be consolidated down the line. While we have not heard target trial dates, we continue to believe that unwinding Instagram (2012) and WhatsApp (2014) acquisitions is highly unlikely.” — J.P. Morgan analyst Doug Anmuth, while maintaining an overweight rating and price target of $330 on Jan. 19.

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