* Reports results 4Q 2019 on Wednesday, January 29 after the close
* Revenue expectation: $ 20.88 billion
* EPS expectation: $ 2.52
When Facebook (NASDAQ 🙂 reports its fourth quarter tomorrow, they are likely to show a similar pattern to what investors have seen in the course of last year: strong sales growth along with a moderate impact of political and regulatory probes.
This potential outcome, contrasting with the struggle of the social media giant in Washington, where it faces a whole series of antitrust investigations, has given investors the confidence to offer Facebook shares higher in the last 12 months. The stock reached a record high of $ 222.75 on January 22, before the fear of the spread of coronavirus hit global stocks. The shares were closed yesterday for the fifth consecutive day at $ 214.87.
Monthly price chart for Facebook
Although growth in the main Facebook app has slowed down, the company is still quickly adding users to other features. A total of 2.8 billion people use at least one Facebook app – Facebook, Instagram, WhatsApp or FB Messenger – every month, making it the world's largest social network.
Encouraged by this growth, analysts have optimistic forecasts for the company's sales and profits for the past quarter. Facebook is likely to report $ 20.88 billion in sales tomorrow, an increase of around 23% compared to the same period a year ago, according to analysts' consensus forecast. Earnings per share increased 6% to $ 2.52 compared to the same period last year.
Core platform still growing
The shares of Facebook have risen by more than 70% since the low of end 2018 – which also reflects the fact that Mark Zuckerberg and the company successfully protect core activities against the barrage of negative publicity and regulatory action.
In the third quarter, Facebook & # 39; s monthly global user base grew by 35 million, including 3 million new users in the lucrative North American market that has shown some signs of slowing down in recent years. This growth in user engagement is coming as the new features of Facebook, such as Stories and the Instagram app, become more popular and generate higher advertising revenue. EMarketer research agency estimates that Instagram will generate more than $ 15 billion in advertising revenue this year, compared to $ 9.1 billion in 2018.
The result of these successes is that Facebook's operating margin, a measure of profitability, is still jealous of many CEOs. It was back above 40% in the third quarter, an increase of 27% in the second quarter and 22% in the first.
That said, the regulatory challenges for Facebook are quite daunting and have implications for the company's future. It is one of the top technology companies with multiple probes focused on the monopolistic power of its platform, potential for misuse, and the company's data practices.
The US Department of Justice, the Federal Trade Commission and more than 40 generals of lawyers conduct separate investigations into antitrust issues. Looking ahead, Facebook will continue to experience the political pressure and potential volatility of its share price, especially in 2020, when US voters appear to be electing their president for the next term.
Bottom Line
There is indeed no guarantee that the challenges for & # 39; the world's largest social media platform will soon disappear. In the last conference call with analysts in October, Zuckerberg warned that 2020 will be a "very difficult year" as the company prepares for the November presidential election.
Despite this difficult working environment and the warning tone of the company, the reality is that there is no other platform that is as powerful or as global as Facebook. We don't see that power diminish, which is one of the main reasons why we continue to like Facebook shares, despite the ups and downs.
