This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Cramer's Action Alerts PLUS - See his portfolio and get alerts BEFORE every trade. Learn more NOW!

Facebook Beats, Shows Mobile Promise (Update 1)

Justin Post of Bank of America Merrill Lynch forecast Facebook beating earnings estimates but said the report will hinge on whether ad revenue is accelerating or decelerating.

"We estimate that mobile revenues could reach $90mn in Q3, up from roughly $25mn in 2Q, although PC revenues could be down q/q (some revenue cannibalization)," writes the analyst, in an earnings primer.

At 14% of overall ad revenue, mobile earnings came in at nearly double of Post's forecast and helped to drive strong year-over-year and sequential revenue growth. In the third quarter Facebook's revenue rose 32% from year-ago levels.

As with Apple's (AAPL - Get Report) iPhone 5 launch, some analysts worried Facebook may face the challenge of meeting user demand for its products as it rolls out new ways to advertise on the social network.

The bull case on Facebook has long centered on the network's still unquantifiable earnings prospects and its growing popularity, but investors should also take stock of obvious risks to the company's share prices through year-end.

In particular, Facebook faces a lockup expiration, where $1.2 billion of shares -- 700 million shares in total - could hit the stock market in the next three months, noted William Bird of Lazard Capital Markets, in a note prior to earnings.

Meanwhile, economic weakness in Europe and a muddled picture on fees paid by social gaming giant Zynga (ZNGA - Get Report) were obvious risks headed into the quarter. In October, Zynga badly missed earnings and cut guidance for the second consecutive quarter.

Facebook's fee revenue for the third quarter came in $176 million, a 13% a 9% decline sequentially from the second quarter of 2012, indicating an impact from Zynga's woes.

While Zynga's struggles forced fee-based revenue, however, Facebook made strong progress in generating new mobile ad revenue.

For more on Facebook, see why the company's valuation shouldn't be a trick question on Wall Street. Also see why a venture capital investor says to think long-term on Facebook after its weak post-IPO performance.

-- Written by Antoine Gara in New York

2 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Try it NOW
Only $9.95
Try it NOW
14-Days Free
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG
ZNGA $2.34 1.10%
AAPL $129.38 0.22%
FB $79.61 -0.18%
GOOG $573.65 0.40%
TSLA $199.54 1.10%

Markets

DOW 18,203.37 -85.26 -0.47%
S&P 500 2,107.78 -9.61 -0.45%
NASDAQ 4,979.9010 -28.1950 -0.56%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs