Facebook Inc (NASDAQ:FB) is scheduled to release its next earnings report on Wednesday after closing bell. The social network has been performing so well over the last year or so that Wall Street has high expectations. In fact, investors have pushed Facebook shares so high that they have become the S&P 500’s best-performing stock, rising by almost 170% in the last 12 months, reports Quartz.
Why has Facebook done so well?
The site notes that Facebook’s stock has soared based on its financial results, which sets it apart from trendy momentum stocks like Tesla Motors Inc (NASDAQ:TSLA) and others. The social network’s stock took off in the June quarter of last year as investors became convinced that its business model not only works, but works quite well, in spite of the shift toward mobile usage.
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Analysts expect stellar results again this time around. On average, they’re expecting the social network to report earnings of 32 cents per share on $2.8 billion in revenue for the second quarter.
Facebook expected to report growth
In a report dated July 21, 2014, Cantor Fitzgerald analysts Youssef Squali, Naved Khan and Kip Paulson said they’re looking for about 64% year over year revenue growth and an EBITDA margin of around 63%. They say Facebook’s popular advertising platform and also its effectiveness have boosted the company’s results. They remain positive on the company’s stock because it is the biggest and “most engaged mass-reach Internet platform for advertisers,” they said.
They note that Facebook is currently testing a Buy button, which enables users to buy things online from other businesses without even leaving. Users are able to use a credit card that’s on file or enter new payment options and save them for use in the future. They can also pay for items without even storing their payment information. The Cantor Fitzgerald team thinks that if this feature becomes popular with both users and advertisers, it could increase Facebook’s conversion rates while also generating a meaningful return on investment for retailers.
The analysts say this is another big test for the company, as its Facebook Gifts feature hasn’t really had an effect on its results.