A lot is riding on tomorrow’s earnings announcement from the company, as people look forward to clarification on a number of issues about Facebook Inc (NASDAQ:FB). Here are the major questions that are uppermost in people’s minds.
This is going to be Facebook Inc (NASDAQ:FB)'s first reporting quarter as a public company. Analysts expect revenues to grow about 9% on the last quarter to about $1.15 billion. Earnings per share are expected to be 12 cents.
There are a few points to keep in mind here. A lot of investment may have gone into servers and other technological upgrades, which could result in a significant charge for depreciation. This might cause a variation with the expectations. "We project that 2012 annual operating and net margins will be adversely affected by significant spending, related to innovation and infrastructure," a recent Standard & Poor's report on Facebook opined.
Facebook may also have to contend with a higher tax rate this quarter, as a consequence of its IPO.
On a positive note, revenues may receive a boost from much better CPM advertising pricing during the quarter, according to TBG Digital's Global Facebook Advertising Report Q2 2012. Global CPM probably rose 41 percent. A different advertising parameter, i.e. CTR also rose by 11% in the quarter. These figures are indicative and are known to not entirely correlate with actual growth.
According to Pivotal Research Group, Facebook Inc (NASDAQ:FB) will benefit more from new advertising initiatives across the entire advertising market, which will drive incremental advertising spend on Facebook. Pivotal claims that growth in TV, print media, and online ads, may have helped boost Facebook’s revenues too.
With a number of recent acquisitions by Facebook, apparently as a means of boosting its capacity to generate revenues from the rapidly growing mobile user base, people would like to hear about the overall thrust and approach to this media that Facebook is planning. June saw the company launching its first mobile-only ad effort – Facebook Sponsored Stories for the News Feed. It would be useful to get a handle on the performance over the last month here.
What strategy governs Facebook’s acquisition decisions? It is known that Instagram was basically a one-man show, but now that the company is public, will there be more accountability and transparency in the acquisition procedures?
Comparisons are inevitable, with Chinese Internet company, TenCent, and its success in generating revenues by setting up e-commerce for use by its users. When is Facebook planning to address this lucrative revenue stream?
Mark, Mend the IPO
All said and done most media publicity in the months after the IPO, has been along the lines of the botched Nasdaq trades, the fall in the price of Facebook Inc (NASDAQ:FB) shares, leading investors to believe that they were handed the shares at an aggressive valuation, and the view by many analysts that the intrinsic worth of the shares is far below, at sub-$10 levels.
Given that investors got a raw deal, it may be a worthwhile public relations effort by Mark Zuckerberg to appear more prominently in the media, to assuage shareholders on their investment in the company.
Facebook, Please Issue Guidance
Google Inc (NASDAQ:GOOG) does not issue guidance. eBay Inc (NASDAQ:EBAY) is the other end of the spectrum in its detailed forecasts. Facebook Inc (NASDAQ:FB) may score brownie points with investors by giving guidance.