At the end of a year filled with scandals and negative headlines in 2018, Facebook Inc. is expected to report the most profitable quarter in history.
When Facebook is released on Wednesday after the closing bell, the Empire controls websites and apps The company is expected to generate nearly $ 6.4 billion in profits in the last three months of the year, more than a billion dollars more than ever in a quarter earlier. Fourth quarter ad revenue is typically the highest in the year as advertisers try to attract buyers, but Facebook is expected to exceed its holiday quarter by more than $ 2 billion last year.
Facebook's record profits are within months of scandals that have been seemingly uninterruptedly disrupting the company since the Cambridge Analytica data breach broke out early last year. Since the revelations of tens of millions of user data that were improperly accessed, controversy surrounding the data collected by Facebook and the sometimes fatal effects of fake news have prompted the company to repeatedly apologize and explain its efforts to Congress The public.
Mark Zuckerberg, the CEO, warned investors at the time that Facebook's efforts to improve security and security ̵
What to Expect
Earnings: On average, analysts surveyed by FactSet estimate earnings for the fourth quarter at $ 2.18 per share, compared to $ 1.44 a year ago, despite the Total amount of profit was reduced by changes in US tax regulations. Contributors to Estimize, estimated by analysts, fund managers and academics as estimated by Crowdsources, project earnings of $ 2.21 per share.
Sales: Analysts sell on average about $ 16.4 billion in the fourth quarter year earlier. Estimators expect sales of $ 16.41 billion.
Most of Facebook's revenue comes from selling mobile ads, which analysts estimate to average $ 14.94 billion in the fourth quarter, according to FactSet. Desktop ads revenue is expected to decline from $ 1.21 billion in the year-ago quarter to $ 1.27 billion. The company's Oculus virtual reality hardware, along with Marketplace's revenue, is included in Payments and Other Fees, which analysts expect to receive $ 197 million.
On average, analysts expect Facebook to earn $ 7.11 per user on average. Wall Street expects daily active user growth in Europe compared to the third quarter. Analysts expect a slight daily membership growth in the US and Canada at 185.3 million, compared to 185 million in the third quarter.
Share movement: Facebook
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The stock has fallen by about 0.1% in the last three months as the S & P 500 Index is the benchmark
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fell 0.7%. Of the 49 sell-side analysts covering Facebook, 40 have buy or overweight ratings for the name, seven rated as holding and two as selling. The average price target is $ 185.51, up 27% from its closing price of $ 145.83 on Thursday.
What to Watch
While Facebook's growth in its history is mainly due to the core Facebook application, eMarketer predicts that Instagram has become a huge source of revenue for the social network. By the end of 2019, Instagram will generate $ 14.38 billion worldwide, representing 4.4% of the global advertising market and 6.2% of the global mobile market.
Facebook is currently not telling investors how much money Instagram is paying to make Messenger or WhatsApp. According to The New York Times, the company plans to merge the underlying technical infrastructure of its various properties by early 2020.
For more: The secrets that Google and Facebook do not want to give you
J.P. Morgan analyst Doug Anmuth wrote in a statement Friday that Facebook is the most discussed and controversial Internet company based on its recent calls and meetings with investors but is still successful. According to JP Morgan polls, the use of Facebook is still high and Instagram continues to grow despite months of negative headlines.
"How often [with Facebook] is the forward-looking commentary and tone likely more important than the reported quarter itself," wrote Anmuth. "We do not expect big surprises. On the revenue side, we expect Facebook to announce a sustained slowdown – probably in the mid single-digit range – that is to be expected. "
Anmuth has a $ 195 price tag with a buy rating.
Bank Securities analyst Lloyd Walmsley wrote in a statement to his clients that Facebook is "Favorite Mega-Cap Internet Name" for 2019 and rates the stock with a target price of $ 195. Like Anmuth, he wrote that investors should turn to the solicitation of information about the company's future sales prospects.
Read more: Mark Zuckerberg defends Facebook's business as "evolving and improving"
Walmsley wrote that he relies on Messenger, Watch, and Facebook Search to make larger revenue drivers by 2019 to become. Watch, the home For Facebook, the original video engagement has around 75 million active users every day. This could amount to an annual $ 275 million segment, he wrote. Walmsley also noted positively Facebook's plan to add $ 9 billion in share buybacks.
Barclays analyst Ross Sandler, who has a target price of $ 180 and rates Facebook a buy, wrote to clients in a statement that he expects regulatory risks and continued negative news to continue to be a problem. However, these factors were priced into the stock at that time, he wrote.
"The best opportunity for the Internet with large market capitalizations is to find a quality name when the emotions are washed out, the valuation pushes down (as was experienced) Alphabet Inc.
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and Amazon.com Inc.
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(2015), and this could now be the setup for Facebook. "