Facebook's (FB) - Get Facebook, Inc. Class A Report shares surged in late January thanks to a strong Q4 report, and have added to their gains since with the help of rising equity markets. They're up 40% so far this year.
That spells somewhat higher expectations as Mark Zuckerberg's firm delivers its Q1 report on Wednesday. The consensus among analysts polled by FactSet is for Q1 revenue of $14.98 billion (up 25% annually) and GAAP EPS of $1.62 (down 4% due to aggressive spending).
In addition to its sales and EPS numbers, here are some things that investors should keep an eye on as Facebook posts its Q1 report after the bell on Wednesday and hosts an earnings call at 5 p.m. Eastern Time.
1. Revenue Guidance
Facebook doesn't provide formal revenue guidance. However, CFO Dave Wehner often provides some commentary on the earnings call about expected revenue growth. During the Q4 call, Wehner said Facebook expects its revenue growth, which in Q4 was at 30% in dollars and 33% in constant currency, to "decelerate by a mid-single-digit percentage on a constant currency basis" in Q1, and to continue decelerating in constant currency throughout 2019.
On a dollar basis, the consensus is for Facebook's revenue to grow 23% annually in Q2 to $16.36 billion, and to grow 24% in 2019 to $68.98 billion.
2. Spending Guidance
Facebook also provides full-year spending guidance on its call. With the company still investing heavily in both its data center infrastructure and content safety efforts, Wehner said Facebook expects its GAAP costs and expenses to rise 40% to 50% in 2019, and for its capital spending to be within a range of $18 billion to $20 billion, up from a 2018 level of $13.9 billion that itself represented more than a 100% increase from 2017's capex.
3. User Growth -- Particularly in Facebook's Most Valuable Markets
Monthly active users (MAUs) for Facebook's core service and Messenger rose 9% annually in Q4 to 2.32 billion, and daily active users (DAUs) rose 9% to 1.52 billion. For Q1, the consensus is for MAUs to rise 8% to 2.37 billion, and for DAUs to rise 8% to 1.56 billion.
In addition to its total MAU and DAU figures, keep an eye on the numbers Facebook shares for North America and Europe, which respectively accounted for 50% and 25% of Q4 revenue and each saw (amid concerns about declining usage of core Facebook in developed markets) a bit of user growth last quarter. The consensus is for Facebook's North American DAUs to be up 1% annually to 187 million, and its European DAUs to be up 1% to 284 million.
Facebook also now shares user figures for its entire app family (core Facebook, Messenger, Instagram and WhatsApp), and has said it will eventually phase out its "Facebook-only" user metrics in favor of app family metrics. In its Q4 report, the company said its app family had about 2.7 billion monthly users and more than 2 billion daily users.
4. Ad Impression and Price Growth
In Q4, Facebook's average ad price fell 2% annually, something that the company blamed on a mix shift in ad impressions toward markets featuring lower average ad prices, as well as a shift toward ads for its stories services, which for now carry lower prices than ads appearing within content feeds. However, the ad price drop was easily offset by a 34% increase in ad impressions, which was driven by Instagram feed and stories ads.
With Facebook in the midst of an aggressive sales ramp for stories ads, it wouldn't be surprising if the company saw similar ad impression and pricing trends in Q1.
5. Stories Commentary
Given the growing importance of its stories services to both app usage and monetization, any fresh details that Facebook shares about them on the call will get attention. On the Q4 call, Zuckerberg disclosed that Instagram Stories now has over 500 million DAUs, and COO Sheryl Sandberg detailed Facebook's efforts to make it easier for existing advertisers to launch stories ad campaigns.
Two areas especially worth paying attention to: any new details about Facebook's plans to start running ads against WhatsApp's heavily-used Status stories service later this year, and any stats shared about Facebook Stories, which appears to still be much less popular than Instagram Stories and WhatsApp Status.
6. Messaging App Commentary
In March, Zuckerberg confirmed that Facebook plans to make it possible for users of Messenger, WhatsApp and Instagram's messaging services to communicate with each other, and to support end-to-end encryption across all three services. He also predicted that in a few years, Messenger and WhatsApp will become "the main ways people communicate on the Facebook network."
Zuckerberg could use the Q1 call to share additional thoughts on how he sees Messenger and WhatsApp evolving in the coming years. And he could get a question or two about Facebook's reported plans to launch a cryptocurrency for WhatsApp that's pegged to the value of existing currencies.
7. Stock Buybacks
Facebook spent $3.5 billion on stock buybacks in Q4, and $4.3 billion on them in Q3. With the company having added $9 billion to its buyback authorization in December, chances are that it made additional stock repurchases in Q1.
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