Facebook Inc (NASDAQ:FB) will report its Q1 2013 earnings on May 1 after the market hours. The social networker is expected to deliver solid results with advertising revenue growing at 46 percent growth to $1.27 billion driven by Mobile and Desktop News Feed ads, says a report from JPMorgan Chase & Co. (NYSE:JPM).

facbook earnings

The report discusses ten questions going into the earnings:

How Is Sentiment?

According to reports, the overall sentiments on the Facebook Inc (NASDAQ:FB) share are not strong due to various factors like engagement, monetization, and margin compression. The company is, however, expected to enhance the user experience and advertising through bigger formats, and likely video. The latest products like FBX, Mobile App Install Ads, and Custom Audiences have received positive feedback.

What Will Make the Stock Go Up or Down?

The biggest factor which will affect the price of Facebook shares, according to JPMorgan Chase & Co. (NYSE:JPM), is advertising, which should increase on a year over year basis.  As per the report, revenue from mobile ads can possibly come in at flat to down on a quarter over quarter basis in the first quarter of 2013. The revenue from mobile ads is expected to come it at least $320 million.

Is User Engagement on Facebook Down?

According to JP Morgan’s analysis the concern over Facebook Inc (NASDAQ:FB) core engagement metrics in the first quarter compared to that of other rivals is not a very serious issue and will not affect the company much. Doubt over engagement through computers and desktops has been the burning issue in the Q1 2013 primarily due to reasons like Facebook share is declining in terms of time spent by users on the site in comparison to other networking apps like Instagram, Twitter, Whatsapp and Snapchat.

facebook and other services share of total internet mobile minutes

facebook minutes per unique visitor desktop vs mobile

Where Will Ad Revenue Come In?

JPMorgan Chase & Co. (NYSE:JPM) is primarily concerned with ad revenues and the mediums from which they come. Facebook Inc (NASDAQ:FB) has the right to place any particular ad on its mobile version or the desktop version. For Q1 2013, the report is expecting ad revenues to come in around $1.274 billion.

Can Mobile Revenue Grow Q/Q?

On the prospects of increased mobile revenue in Q1 2013, JP Morgan holds that Mobile News Feed revenue will come in at $353 million, an increase of 16 percent from $306 million in the 4Q12, compared to a 101 percent increase in the previous quarter. According to the report, Facebook Inc (NASDAQ:FB) is catching the eyes of the mobile advertisers primarily in the international markets.

How Much Will Desktop Right Rail Decline?

Regarding Desktop Right Rail, JPMorgan Chase & Co. (NYSE:JPM) has estimated it to decline 15 percent year over year in 1Q 2013 from -10 percent in 4Q 2012. The report estimates lower quarter over quarter growth from Q2 2013 to Q4 2013 compared to those of Q2 2012 to Q4 2012. The profit from the latest ad initiatives like video and re-targeted ads in the News Feed is included.

Where Are FBX and Custom Audiences?

FBX for Desktop Right Rail ads was launched by Facebook in September and later launched FBX ads in the Desktop news Feed in March. FBX targeting, according to JP Morgan, is enhancing the quality of Desktop Right Rail advertising.

What Happens to Margins In 2013?

EBITDA is expected to be at $736 million, a 50.5 percent margin, a decline from 60.6 percent in the Q4 2012 and 56.1 percent in Q1 2012.

What Gets Us Excited About Facebook?

JPMorgan Chase & Co. (NYSE:JPM) is holding high expectations for social advertising, which according to it is in very early stages. The report is bullish on the latest News Feed features.

The inline results from the social networker will boost share prices in the near term. “Though we recognize that Facebook Inc (NASDAQ:FB) may need to put up multiple strong quarters and be willing to talk more forward-looking about the top-line to get investors more sustainably engaged,” says the report.