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Facebook Earnings Preview: Will Investors "Like" Q4 Earnings?

Facebook (Nasdaq: FB) stock has staged an impressive rebound in recent months after the company's disastrous IPO.

Since mid-November, the social networking giant's stock has gained more than 68%, going from a near-low of $19 to more than $32.

Investors will be watching closely when Facebook releases Q4 earnings after close tomorrow (Wednesday) to see if the company can maintain its momentum.

Expectations are high, as a bevy of analysts have upgraded their outlooks for the stock, though it is still trading well below its IPO price of $38 and its high of $42.

Wall Street projections are for Facebook to report earnings of 15 cents per share on revenue of $1.52 billion.

What Will Investors Be Looking For?

Much of the focus tomorrow will be on how much traction FB has gained in the growing mobile arena.

The Menlo Park, CA-based company must show it is successfully stashing cash from its increasing mobile audience, now numbering more than 600 million, as well as earning money from new programs launched over the past several months.

Investors will be hanging on every word regarding the company's yet-to-be-launched Graph Search, a kind of curated search tool FB hopes will produce additional revenue.

The commercial potential for such a tool could handsomely reward Facebook. While the tool remains in its infancy, its prospects look promising.

Internet trollers conduct billions of searches daily on rival sites like Google (Nasdaq: GOOG), Yahoo (Nasdaq: YHOO) and Microsoft (Nasdaq: MSFT).

Facebook, which has 1 billion users, has said it's not going after Internet search giant Google with Graph Search, but it sure looks like FB's doing just that.

The financial stakes are high for Graph Search.

According to eMarketer, in 2012 Facebook earned $4.2 billion from advertising, amounting to 84% of its estimated total revenue, led by mobile display. Facebook garnered roughly 18% of the U.S. mobile ad market last year, more than the 17% earned by Google.

But a mobile version of Graph Search will take "years and years" to develop, Facebook CEO Mark Zuckerberg has said.

Another new FB program, the Instagram photo-sharing app, has been under scrutiny because of the company's controversial privacy policy for the app. Investors likely will focus Wednesday on word of any decline in Instagram user activity or defections.

Why Analysts are Bullish On FB

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  1. H. Craig Bradley | January 30, 2013


    Sounds like you are trying to make a case for holding on to Facebook shares if a current owner. Similarly, President Obama and the rest of the media are sending a positive message: We are now in full recovery and housing is improving.

    While I view the current arrangements as very tenative but recognize the low interest paradiagm could continue for a couple more years. Nobody really knows for how long. One thing is for sure: Facebook remains a very speculative stock that is very pricey. It won't hold up well if the market has a major correction or during a recession. Some expect a recession later on this year. Hold?

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