Facebook Earnings Preview: Ad Revenue Set To Grow Again In Q4

Facebook (NASDAQ:FB) is scheduled to report its fourth quarter results on Wednesday, January 31. We expect the company to report revenue growth of around 36% year-over-year (y-o-y) to $12 billion, driven by advertising revenue growth. Ad revenue growth is likely to be driven by an increase in average price per ad and higher user engagement. We have created an interactive dashboard that illustrates our expectation from various divisions. You can modify the revenue and operating profit expectations for each division to see how the EPS will be affected in Q4.

Content, Mobile Driving Growth

For Q4, we expect Facebook’s advertising revenues to grow as its mobile ad revenues continue to gain traction. As mobile ad revenues grow due to an increase in both the frequency of ads shown in News Feed and the price per ad, the revenues for Q4 should improve by close to 40%. The company’s ARPU is likely set to improve once again as monetization rates across both the U.S. and international regions grow.

Facebook rolled out paywall services for content in order to entice more content developers to use Facebook as a platform to disseminate information. We believe that this has not only led to growth in monthly average users for the company but also growth in advertising revenues. The company is also looking to improve its engagement and monetization rate by increasing the video content across its platform through ‘Watch’. We expect management to share more insights on how this strategy has fared among users and advertisers.

Our $165 price estimate for Facebook is slightly below the current market price.

Please refer to our complete analysis for Facebook here.

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