Facebook Inc (FB) Looking Good For Earnings

Facebook Inc (FB) Looking Good For Earnings

As Facebook’s next earnings report approaches, more and more firms are releasing data which suggests the social network might post a beat when it reports on July 29. Earlier this morning, Nanigans released data which suggested that ad spend on Facebook continues to trend upward, and now Raymond James and JPMorgan have their own positive data, while Deutsche Bank is also bullish on the social network.

Facebook (FB) benefits from social ad growth

In a report dated July 14, Raymond James analyst Aaron Kessler and his team reported that search and social advertising platform Kenshoo reported a 114% year over year increase in social advertising spend. The growth is also strong sequentially at 27%.

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The firm reported that most of that growth came on mobile devices, as social ad spend increased 167% compared to last year. Spend on desktop is also very strong, however, as it climbed 57% year over year. The Raymond James team pointed out that the growth includes both new and previous clients at Kenshoo, which likely means that the total growth is skewed. They still think the growth demonstrates just how strongly social ad spend is growing through.

Kenshoo also reported a 129% year over year increase in social ad clicks and a 45% sequential increase in ad clicks. Cost-per-click declined 7% year over year and 12% sequentially, however.

Facebook (FB) still doing well in mobile

Another set of data from comScore indicates that Facebook Inc (NASDAQ:FB) still held a solid share of mobile time in June at 24%, a slight increase from the previous month’s 23%. (Graphs and charts in this article are courtesy JPMorgan.)


JPMorgan analyst Doug Anmuth and his team noted that the percentage does not include Instagram or WhatsApp, which means Facebook’s mobile growth is even stronger than that percentage. Across both mobile and desktop, Facebook’s share of internet minutes was 19.3%, or about 6.3 times the amount of time spent on competing services.


Further, the JPMorgan team pointed out that when including WhatsApp and Instagram, Facebook’s total minute share increased 30% year over year last month. Growth in WhatsApp drove that increase as it climbed 98% compared to last year. Also core Facebook mobile minutes increased 58% year over year.


For a detailed look at how Facebook’s U.S. minutes compare to those of Instagram, Twitter, WhatsApp and Snapchat, see the chart at the bottom of this article.

Facebook (FB) has strong drivers

Deutsche Bank analyst Ross Sandler and his team also weighed in on Facebook ahead of this month’s earnings report. They recommend that investors add more shares to their portfolios before the release as all their checks were solid throughout the June quarter. They also believe the social network has “more revenue catalysts than most” other companies.

They also saw increases in the video ad fill rate, Custom Audiences adoption, and direct marketers using the DPA platform. They also believe demand for ads on Instagram is extremely strong but that Facebook is rolling out the ads slowly rather than just opening the floodgates all at once. As a result, they expect contribution to revenue from Instagram to remain “somewhat muted.”

The JPMorgan team expects News Feed targeting improvements will drive Facebook’s near term growth and also mentioned Custom Audiences as a big positive for the social network and its advertisers. In fact, their checks suggest that “a high proportion” of advertisers’ spend on Facebook Inc (NASDAQ:FB) uses Custom Audiences.

Another area they expect to drive Facebook’s results is auto-play video ads, which they believe “ramped meaningfully” during the second quarter. Further, they think videos could drive higher pricing for Facebook ads as demand for them rises.

What to expect in Facebook’s (FB) earnings report

The JPMorgan team expects to see ad revenue of $3.79 billion, a 42% increase year over year which compares to the consensus estimate of $3.76 billion. They’re looking for a 63% decline in impressions but 281% increase in eCPM. They also point out that the second quarter is the last one before Facebook laps the larger right-rail ad format, which it launched in the third quarter of last year.

For total revenue, the JPMorgan team is expecting $4.02 billion, which is 1% ahead of the consensus estimate. They’re looking for EBITDA of $2.53 billion, which is 2% higher than the consensus and compares to Deutsche Bank’s estimate of $2.7 billion. The Deutsche Bank team is looking for earnings of 54 cents per share, compared to the consensus of 47 cents per share.

As of this writing, shares of Facebook were up 0.59% at $90.21 per share.


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