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WHAT TO WATCH FOR IN FACEBOOK EARNINGS

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WHAT TO WATCH FOR IN FACEBOOK EARNINGS

April 29 2015, 07.20am GMT

STOCK.com

Facebook is expected to release its first-quarter earnings on Wednesday. Here’s what to watch out for.

Facebook Inc. (FB, -1.50%) is set to report its first quarter earnings after the closing bell on Wednesday. later today. According to analysts surveyed by Thomson Reuters, the social media giant is expected to report an increase in earnings per share (EPS) of 40 cents per share compared with the 34 cents reported for the same period a year earlier,

Added to this, analysts also expect Facebook to report revenue of $3.56 billion. This is a 42 percent increase from revenue reported the same time last year of $2.5 billion. Meanwhile, advertising revenue, which makes up more than ninety percent of the company’s revenue is expected to increase by over 50 percent. While this increase is quicker than the overall advertising market, it still marks a slower increase compared with last year when ad revenue of Facebook increased by 83 percent.

Facebook last updated its “ad load” number in 2013 where one ad was shown for every 20 posts. Some analysts however say that the company is showing fewer ads. It seems though that this supply constraint has worked in favor of Facebook making it a serious threat to the ad dominator globally, Google (GOOGL, -0.31%). From estimates posted by RBC Capital, Facebook’s ad prices compared with the previous year rose 84%. When the earnings report will be released, investors will certainly pay close attention to the company’s video strategy owing to the fact that Facebook generates about 3 billion views in any given day.

Investors will also keep a keen eye on the potential of a number of Facebook’s mobile apps. One of the apps on most investors’ radar is the Messenger app after Facebook announced in March of its plans to open the platform to outside developers. Messenger app and Instagram have 600 million and 300 million monthly users respectively. Whatsapp Messenger has the most users at 800 million monthly users.

It is important to keep in mind that Facebook generates half of its revenue out of the U.S. from places such as Australia, Canada, Brazil and Europe. Based on this, a strong U.S. dollar (USD) will only make their profits look smaller, something we have already witness with other top technology companies in the U.S.

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