How Did Facebook Perform In Q4?

Facebook (NASDAQ:FB) reported its Q4 earnings on January 30, with the company’s revenue and EPS coming in ahead of consensus estimates. The stock traded up over 10% Thursday morning, driven by the positive results as well as dovish statements from the Fed which drove up the markets overall. Going forward, we expect Facebook’s pricing weakness, investments in safety and health along with regulatory requirements to put some pressure on the stock price. Following the rally, our price estimate is about in line with the current market price.

Our interactive dashboard on Facebook’s Price Estimate outlines our forecasts and estimates for the company. You can modify any of the key drivers to visualize the impact of changes on its valuation.

While investors may have gotten excited by the 30% revenue growth registered by the company for the quarter, it should be noted that this number is much lower than the corresponding figure of 47% in 2017.

Furthermore, the company’s management noted that the strength was due to the holiday season and the company expects a deceleration of revenue growth in Q1. Even on ‘Stories,’ which showed good strength, revenues are expected to decelerate throughout 2019. Potential pricing weakness on account of privacy issues will likely be a key headwind, with the broader macro environment also expected to pressure overall growth.

Another notable development was management considering grouping together all of its messaging assets – WhatsApp, Instagram and Messenger – to leverage the combined reach of almost 2.7 billion unique users, which bodes well for the company’s long-standing plan of e-commerce domination. While Facebook’s management acknowledged that there are many aspects that warrant consideration before such an arrangement can be formalized, this could raise additional privacy issues and regulatory scrutiny at a time when the company hardly needs more.

While management’s commentary suggested that Instagram’s contribution to overall growth may have become meaningfully greater than that of the core Facebook platform, the company did not provide much color around engagement of the two assets on a standalone basis.

Do not agree with our forecast? Create your own price forecast for Facebook by changing the base inputs (blue dots) on our interactive dashboard.