Today is the most anticipated day for Facebook since the company went public May 18. The social network will release its second-quarter financial report at 5 p.m. ET/2 p.m. PT, giving the world a first glimpse into Facebook’s books. Several outlets have been speculating about just what is in this report.
What are people saying about the earnings call?
Ad revenue is particularly important for Facebook, which has gotten itself many skeptics since going public. But the company will also mention user engagement numbers, another just as important metric. Facebook will either confirm or deny that it has lost some popularity in the U.S. and other markets. Since Facebook sells people, it needs to keep those people coming to make money. The other fun thing will be its mobile share. That’s the up-and-coming thing that Facebook is trying to conquer.
Wedbush analyst Michael Pachter believes it’s unlikely that Facebook will miss Wall Street’s estimates. He added that the banks that led Facebook’s IPO likely advised the company to beat expectations for its first public quarter, something that became more achievable once estimates declined.
The Wall Street “consensus” is that Facebook is going to post utterly miserable ad revenue growth today – 19% year-over-year.
To put 19 percent in context, consider that Google, which had its IPO in 2004 and has $40 billion in revenues, grew its entire business from that huge base by 21 percent in Q2.
19 percent would be a drastic deceleration of growth for Facebook. In Q1, its ad revenues were up 37 percent year-over-year.
There has long been a question of how Mark Zuckerberg intends to manage Facebook. It is his creation and vision, but will he be the one to walk analysts through the results, or will he have Chief Financial Officer David Ebersman and Chief Operating Officer Sheryl Sandberg handle the call? Today will give a clear signal of how the man who controls the company will lead it.
Sterne Agee analyst Arvind Bhatia said the falloff in Zynga’s business would have a “short-term negative impact” on Facebook, but that Facebook could ultimately benefit.
He says Zynga blamed changes Facebook made to help users discover games and other content on Facebook, leveling the playing field for other gaming companies and potentially weaning Facebook from its dependence on Zynga, which accounted for as much as 15 percent of Facebook’s revenues last quarter.
Facebook could make up some ground with a solid earnings report Thursday afternoon, and Wall Street looks poised to react to it.
(J.J. Kinahan, TD Ameritrade’s chief derivatives strategist) notes that the July weekly straddle — a trading strategy where an investor believes a stock’s price will move significantly, but is not sure which direction — is trading at $3 ahead of the report.
“In other words, the market is expecting that we have a $3 move up or down based on [Facebook’s] earnings,” he said.
This is going to be an opportunity for them to really make a difference in terms of their investor relations strategy and set the record straight. They need to gain that momentum back and the exuberance that they lost as a result of the IPO.
Readers: What do you think Facebook’s earnings call will reveal?