Facebook Q4 2013 Earnings Preview

  • Monetization of mobile ads will boost Facebook's overall revenue this Q4.
  • We expect a revenue of around $2.35 billion and a Non-GAAP EPS of 25 cents per share for Facebook.

Facebok Q4 2013 earnings preview

The excitement of the earnings season doesn't get higher than this. The week will see some of the biggest and most popular online companies including Google, Yahoo, Facebook, and Amazon announce their Q4 2013 results. Following our preview of Yahoo’s earnings, we today provide a preview into Facebook’s (NASDAQ:FB) Q4 2013 results. Facebook will announce its Q4 results on Wednesday, Jan 28 2014, after market hours.

Historical performance

The company has registered solid topline growth for the last two years growing at an average rate of over 40% YoY every quarter, for the last eight quarters. Even more interesting has been the company’s topline growth in Q3 2013, registering over 50% YoY growth for the first three quarters.  The company reportedly found an effective solution to monetize its fast growing mobile user base in Q2 2013, which has helped to drive revenue growth as well as margin expansion over the last two quarters. The turnaround in mobile ad revenue in Q2 has helped drive the earnings at the firm. The chart below displays the revenue growth and profit margins of Facebook over the last 8 quarters.

Facebook revenue growth and profit margins

The company has seen subscriber growth being driven largely by mobile users and hence it was extremely important to effectively monetize the mobile users in order to sustain revenue growth. The chart below displays the monthly active users (MAU’s) v/s Mobile MAU’s growth over the last four quarters.

Q4 2012 Q1 2013 Q2 2013 Q3 2013
MAU's (in millions) 1060 1110 1150 1190
MAU YoY growth 25% 23% 21% 18%
Mobile MAU's (in millions) 680 751 819 874
Mobile MAU YoY growth 57% 54% 51% 45%

The company’s mobile revenue per user is a direct function of the fast growing mobile user base and effective monetization of the same. The mobile revenue per user saw a significant increase in Q2 2013 and Q3 2013 after Facebook reported to have found a solution to its mobile user base monetization problem.

We now take a look at the important metrics or numbers which will be closely observed during the conference call.

Important metrics for Facebook

Revenue growth and earnings are two numbers which will be watched by every investor as the excitement of the actuals v/s estimates and the following scramble in the stock price is all set to unfold. However it will be wiser to look at a few other numbers, which we consider as good indicators of Facebook’s future potential.

The revenue and earnings growth in Q4 2013 will be driven by subscriber growth and growth in mobile revenue per user. It will be interesting to note the impact of Facebook’s video advertising on its revenues and plans to monetize Instagram, which could be the next value drivers for the company.

Our estimates

We expect the company to report revenue close to $2.35 billion (48% YoY growth) fueled by higher revenue per mobile user, subscriber growth and increased number of advertisements sold. We see a Non-GAAP EPS of 25 cents per share and GAAP EPS of 19 cents per share. According to Streetinsider.com, the analyst consensus estimate for Facebook is revenue of $2.33 billion and a Non-GAAP EPS of 27 cents per share. View our Facebook stock analysis.

To see Facebook’s latest stock price movement, click here (NASDAQ:FB)

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Neither Amigobulls, nor any members of its staff hold positions in any of the stocks discussed in this post. The author may not be a certified/registered investment advisor, and the opinions expressed should not be treated as investment advice. Buying and selling of securities carries the risk of monetary losses. Readers/Viewers are advised to carry out their own due diligence and consult their investment advisors before making any investment decisions. Neither Amigobulls, nor the author have any business relationship with any of the companies covered in this post.

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