Earnings Preview: High hopes for Facebook's 4Q
NEW YORK (AP) — Analysts seem upbeat about Facebook Inc.'s looming fourth-quarter earnings report, scheduled for after the stock market closes on Wednesday. After a challenging 2012 that capped a disappointing initial public offering, investors have sent Facebook's stock up more than 17 percent this year in hopes that new advertising formats, especially on mobile devices, will help increase its revenue.
WHAT TO WATCH FOR: Investors will be watching for strong revenue growth at the world's biggest social networking company, especially from mobile advertisements, as well as signs that Facebook users are staying engaged with the service. More than half of Facebook's users access it through a mobile device, and the company only started showing mobile ads earlier this year.
Raymond James analyst Aaron Kessler, who recently upgraded Facebook to "Outperform" from "Market Perform," expects the company to report higher revenue thanks to mobile, new ad formats and international expansion. He thinks the company's results will surpass Wall Street's expectations.
Wedbush analyst Michael Pachter likewise predicts the company will beat Wall Street's expectations, with solid revenue "from a slew of new products, mobile growth, and increasing user engagement."
"Results should reflect management's commitment to sustained revenue and profit growth, while improving the user and marketer experience," he added.
Facebook could also give an update on how its recently unveiled search feature is faring. The company announced the service in January at its Menlo Park, Calif., headquarters. It's currently only available to a small percentage of users.
WHAT'S EXPECTED: Analysts, on average, are expecting earnings of 15 cents per share on revenue of $1.51 billion, according to a data provider FactSet. Facebook has not given guidance.
WHY IT MATTERS: Facebook is the world's No. 1 social media company, with more than 1 billion users. Its results can help assess the health of the overall online advertising environment.
LAST YEAR'S QUARTER: Still a privately held company, Facebook earned $302 million on revenue of $1.13 billion in the final three months of 2011.