Facebook shares hinge on active user growth and revenue outlook

Facebook shares hinge on active user growth and revenue outlook

After the recent furore over a UK political consultancy’s access to the data of at least 50 million Facebook users, Facebook’s first quarter results, coming after the U.S. market closes on Tuesday, could sound an early warning about the vast business of digital marketing that relies on gaming personal privacy. According to a consensus forecast compiled by Thomson Reuters, earnings per share of $1.35 are expected with revenue of $11.41bn, representing rises of 30% and 42%, respectively.

Even if Facebook quarterly income and revenue meet expectations though, Wall Street attitudes could harden if the #deletefacebook meme ties in with further slowdowns among North American and European active users like those seen in the fourth quarter. User data trends will therefore be scrutinised again. Q4 daily active users largely plateaued at 1.4 billion and the growth rate of monthly active users also slowed to 2.13 billion. Changes to Facebook’s news feed also meant that time spent on Facebook declined by 50 million hours every day in Q4, making that metric another important watch point for Q1. The network’s rapid roll out of consent opt-ins in the wake of its privacy debacle may have an impact on engagement.

Given that any financial impact stemming from a decline in users would lag active user data, revenue forecasts for the forthcoming quarter, rather than Q1, will be a litmus test. Wall Street analysts already project Q2 revenues at $12.95bn, up 39% on the year, pointing to Facebook’s weakest second-quarter growth rate since 2015. For similar reasons, share price reaction to Facebook’s earnings report is more likely to hinge on the group’s revenue expectations than on any other measure.

With Facebook still in crisis mode, executives will have a tough time stoking much interest from investors on much else tonight though there are signs that fallout from the scandal, if any, was contained. Several U.S. brokerages have tracked ad spending trends over the quarter and readings point to an 11% decline quarter-quarter, well within seasonal norms. That forecast also nearly matches consensus forecasts for a quarterly fall of 12%, according to Thomson Reuters. Similar indications point to ad prices rising 6% compared to the last quarter of 2017, driven by a 9% rise in mobile ad prices.

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