Facebook Earnings Preview: Asia A Key Growth Driver


Facebook Inc (NASDAQ:FB) will announce its third quarter results on October 30th after the market close. Sterne Agee analysts Arvind Bhatia and Brett Strauser are expecting the social networking company to report revenue and adjusted EBITDA of $1.87 billion and $961 million respectively, which will be 48% and 37% year on year growth. Consensus estimate for revenue and adjusted EBITDA are of $1.91 billion and $1.04 billion.

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Facebook Earnings Preview: Asia A Key Growth Driver

Mobile performance most awaited item

The report notes that investors are mainly concerned with mobile performance, and expect mobile advertising revenue to be $754 million, increasing 15% sequentially, and representing a 40% mix of overall advertising revenue. Consensus estimate for the third quarter mobile revenue is $796 million.

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Analysts are modeling a daily ad revenue run rate of $8.3 million, a surge from $7.3 million in the second quarter, $4.15 million in the first quarter and $3.4 million in the fourth quarter.

Analysts were previously expecting that Facebook Inc (NASDAQ:FB) will roll out its video advertising by the end of 2013, but the company has stated that they will not launch the new product in 2013. Analysts noted in the report that they have not considered the online video ads estimates in their models, but are expecting on-line video advertising to be a core growth driver in 2014.

Asia a key growth driver for Facebook

Among other key developments, monthly active users (MAUs) for Facebook Inc (NASDAQ:FB) are expected to be 1.192 billion or an increase of 18% year on year and 3% sequentially as against second quarter monthly active user’s growth of 21% year on year and 4% sequentially. Just like the previous quarter, analysts expect that international users, primarily Asia will drive most of growth for Facebook (almost 92%).

Daily active users (DAUs) are modeled at 725 million, which is an increase of 24% year on year and 4% sequentially compared to the second quarter daily active user growth of 27% year on year and 5% sequentially.

Facebook Inc (NASDAQ:FB) is estimated to post average revenue per user (ARPU) of $1.59, which is an upside of 24% year on year, but a decline of 1% sequentially. In the third quarter of fiscal 2012 average revenue per user surged 1% sequentially. Analysts are estimating ARPU in the United States to be of $4.37, increase of 29% year on year. For Facebook Inc (NASDAQ:FB), the United States and Europe are two major geographies contributing in the service and product monetization. Compared to these two areas, Asia and the rest of the world remain low on monetization, however, presenting long term opportunity.

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Aman is MBA (Finance) with an experience on both Marketing and Finance side. He has worked as a Risk Analyst for AIR Worldwide, and is currently leading VeRa FinServ, a Financial Research firm. Favorite pastimes include watching science fiction movies, reviewing tech gadgets, playing PC games and cricket. - Email him at amanjain@valuewalk.com
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