Facebook, the world’s largest social media company, is slated to post second-quarter earnings Wednesday after the market’s closing bell, and as with other big-tech companies reporting this month, analysts expect record-breaking sales buoyed by a resurgent advertising market.
On average, analysts expect Menlo Park, Calif.-based Facebook to report record second-quarter revenue of $27.8 billion, according to Bloomberg data, up 49% from the same period last year.
Net income is expected to hit $3.02 per share, or roughly $8.5 billion, 68% more than the $1.80 posted one year ago.
In a Monday note, Bank of America analysts said they expect Facebook added about 36 million monthly active users last quarter, which would mean a record 2.9 billion users for the social network’s suite of offerings—including Instagram and its Messenger service.
A slew of analysts reiterated bullish Facebook stock ratings over the past week in anticipation of a better-than-expected earnings report, with Credit Suisse’s Stephen Ju saying improving trends in advertising (where Facebook derives the majority of its revenue) should bode well for the company’s bottom line.
As of 12 p.m. ET, Facebook shares were up 1.2% to $373, lifting the stock’s year-to-date gain to about 38%—more than double the tech-heavy Nasdaq’s 16% increase.
What To Watch For
Facebook’s second-quarter earnings call is at 5 p.m. EDT Wednesday.
Last week, smaller social media rivals Snap and Twitter stunned Wall Street with earnings that blew past expectations, posting revenue growth of 116% and 74%, respectively. Both sets of results point to a stronger-than-expected advertising recovery for online media, which could ultimately weigh on Facebook stock after earnings if the company doesn’t live up to its peers, Bank of America notes.
“Expectations for earnings growth are the highest they’ve been in years, allowing more room for disappointment,” Brian Overby, a senior options analyst for Ally Invest, said in a Tuesday email, forecasting Facebook shares could move as much as 6% after the earnings report. “On top of that, investors will be watching big tech extra closely because the sector has benefitted so much from strong consumer spending and the move toward a more tech-oriented society.”
Founded in 2004 by a group of Harvard College classmates including billionaires Mark Zuckerberg and Dustin Moskovitz, Facebook is now the fifth-largest U.S. company by market cap, worth nearly $1.1 trillion. More than 95% of its revenue comes from advertising, and about 50% of sales are in the U.S. and Canada. Though Bank of America expects the stock could soar another 20% in the next three years, its analysts caution the biggest risks to watch for include declines in user activity, privacy issues, big-tech regulation and any adverse impact on advertising prices.
$386.50. That’s how high analysts think Facebook shares can go over the next year, according to Bloomberg data, giving the stock about 4% upside to current prices of about $370.