Facebook, Inc. (Nasdaq: FB) and its investors have dealt with plenty of animosity in 2018, but up to this point the company’s high-growth online advertising business has been mostly unscathed. Investors are hoping that trend continues when Facebook reports its second-quarter earnings on Wednesday afternoon, and analysts are expecting more big numbers from Facebook.
Consensus Wall Street estimates are calling for FB stock to earn $1.72 per share in the second quarter. Analysts are expecting $13.3 billion in revenue, up 43.5 percent from a year ago.
Investors will be also be watching to see if Europe’s General Data Protection Regulation, which was implemented in the second quarter, had a significant impact on Facebook’s business.
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Despite constant negative press surrounding the fallout from Facebook’s Cambridge Analytica data scandal and the changes Facebook made to its platform, Facebook’s advertising business continues to grow. FB stock is up another 19 percent year-to-date to new all-time highs, and GBH Insights head of technology research Daniel Ives says there are no signs of a slowdown heading into Wednesday’s report. Ives says Facebook and CEO Mark Zuckerberg passed their public grillings by U.S. and European regulators with flying colors.
“Now the focus for the Street is around 2Q as another pivotal barometer this week to gauge any fundamental damage (advertising, MAU growth) post the Cambridge situation and News Feed overhaul moves,” Ives says.
In addition to advertising revenues and user growth, Ives says investors should keep a close eye on costs.
“We believe 2Q tracked to be a relatively strong quarter with modest upside to the Street’s estimates, while the investment profile for [the second half] might need to be ramped up further in light of increased security expenses,” he says.
Canaccord Genuity analyst Michael Graham says Facebook‘s expenses may not be as bad as feared.
“We think there’s still a good chance the company ends the year growing expenses by less than it (and consensus) anticipates,” Graham says.
He says even after Facebook’s strong performance, FB stock is still fairly priced given the company’s growth profile and multiple long-term levers.
“Although ad load should moderate, we believe pricing and contribution from Instagram can more than compensate,” Graham says.
[See: 7 of the Best Stocks to Buy for 2018.]
GBH Insights has a “highly attractive” rating and $225 price target for FB. Canaccord Genuity has a “buy” rating and $240 target for Facebook stock.
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Earnings Preview: What to Expect from FB Stock originally appeared on usnews.com
