Reports Q2 2021 results on Wednesday, July 28 after market close
Expected Revenue: $27.85 Billion
EPS forecast: $3.04
Judging by the current momentum in Facebook (NASDAQ:) stocks, there's little doubt that investors can expect strong sales again as the social media giant releases its latest quarterly results today.
The stock was one of the best-performing of the FAANG's group, which included Apple (NASDAQ:) and Amazon (NASDAQ:). FB is up more than 30% this year, pushing its market cap to over $1 trillion in the past quarter.
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Revenue is likely to rise to $27.85 billion, up 49% from the same period a year ago, while the company's earnings per share are expected to rise to $3.04 from $1. 80 a year ago, according to analyst consensus forecast.
Behind these strong predictions: robust digital advertising spend by small and medium-sized businesses in the post-pandemic environment, where online customer acquisition is critical to their survival.
Indeed, all signs point to this business imperative that also affects the California-based social media giant, so it won't disappoint in this area. Facebook has a history of cautious outlook and then exceeding expectations.
Further bolstering this argument are recent earnings reports from smaller social media companies, such as (NYSE:) and (NYSE:), which far exceeded expectations and provided a positive forecast for the current period.
These companies are also seeing increasing user numbers on their platforms as the public uses these platforms for home entertainment and keeping track of loved ones in many countries where the pandemic is still raging, forcing governments to impose lockdowns. In this environment, larger advertisers rely more on social media sites, while small businesses increase their spend to reach digital customers.
For Facebook, this was a favorable environment to increase ad prices. The average price per ad increased by 30% from a year earlier, and the number of ads delivered increased by 12%.
Threat of software update
Even with this merry revenue season, a potential threat that could hurt Facebook is a new prompt from Apple, which arrived in an iOS software update for iPhones in early June, explicitly asking users of each app if they were willing to be tracked about their internet activity.
Bloomberg reported early this month that when users on iPhones are asked if they want to be tracked, the vast majority say no.
Bloomberg report stated:
"That worries Facebook advertisers, who are losing access to some of their most valuable targeting data and have already seen the effectiveness of their ads diminish."
Facebook executives told investors during their April guidance that they believe many users will opt out of this tracking, making it more difficult for advertising clients to tailor their outreach campaigns precisely.
"We remain concerned about the impact this update will have on small businesses' ability to use their advertising budget effectively," Chief Financial Officer David Wehner said in a conference call in April. "Having said that, we believe the impact on our business will be manageable."
Starting point
Facebook's revenue momentum is likely to continue for most of this fiscal year, helped by the growth of user and ad revenue across its platforms, including Instagram and WhatsApp. But the Apple iPhone software update can pose a challenge if it has a major impact on advertisers.
