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Facebook (FB) Q2 2019 Earnings Preview: Revenue, User Growth & More

Benjamin Rains

Shares of Facebook FB popped 2% Monday in a sign that investors might expect strong second-quarter 2019 financial results from the social media firm. Facebook stock is now up over 54% in 2019 and its plan to enter the cryptocurrency space has seemingly been well by received by traders.

Despite the positivity, some remain concerned about the increased government scrutiny Facebook faces. So let’s check out what to expect from FB’s Q2 earnings results and more, including user growth.

Recent News

The Wall Street Journal reported on July 12 that the Federal Trade Commission voted 3-2 in favor of reaching a settlement with Facebook over its privacy practices. New reports now suggest that the FTC will announce before Facebook reports a $5 billion fine that will mark the resolution of a long-running investigation into the firm’s involvement with the now-defunct data collection firm Cambridge Analytica. This might seem like a nice chunk of change, but investors see the settlement as a win for Facebook, which pulled in $15.08 billion last quarter alone.

Aside from the FTC settlement, the most relevant Facebook news was the company’s official June 18 announcement of Libra, its blockchain-based payment system that will be backed by hard assets, in partnership with Uber UBER, Spotify SPOT, Mastercard MA, and PayPal PYPL. Facebook’s crypto move is part of a broader diversification plan, which includes augment and virtual reality. Mark Zuckerberg has also slowly teased plans to shift Facebook back toward a platform focused more on communication between friends and family than the news aggregator it has become.

Overall, Facebook’s family of services, which includes Facebook, Instagram, WhatsApp, and Messenger, saw its daily and monthly active user totals climbed 8% in Q1. Executives estimated that around 2.7 billion people use at least one of FB’s family of services on average every month. This figure alone should help Facebook remain a powerhouse, especially as non-ad supported platforms such as Netflix NFLX and Amazon AMZN Prime make consumers harder to reach.

 

 

 

 

Outlook & Earnings Trends

FB’s second-quarter revenue is projected to jump 24.3% from the prior-year period to reach $16.45 billion, based on our current Zacks Consensus Estimate. This would mark a slowdown from Q1’s roughly 26% growth and Q2 2018’s 42% top-line expansion. In fact, Q2 is expected to be Facebook’s slowest quarterly revenue growth as a public company, based on our data here at Zacks.   

Overall, Facebook’s fiscal 2019 revenue is projected to climb 24.1% from $55.84 billion to $69.31 billion. The social media giant’s fiscal 2020 revenue is then expected to climb 21.2% higher than our current year estimate to reach $84 billion. Clearly, both 2019 and 2020 would mark a significant slowdown from 2018’s 37% top-line growth. And this might be the start of a new normal for Facebook, as the law of large numbers makes year over year expansion on a percentage basis harder to come by.

Moving on, Facebook stock plummeted in the second half of 2018 after executives said its margins and profits would take a hit in the near-term as the firm spent more on everything from increased security to expansion. With this in mind, FB’s adjusted Q2 earnings are projected to jump 9.2% to $1.90 share. Meanwhile, the company’s full-year fiscal 2019 EPS figure is projected to dip 6.3%. FB’s 2020 earnings are then projected to surge 31% higher than our current-year estimate.

Investors should also note that Facebook has seen its earnings estimate revision activity trend completely in the right direction recently, which helps it earn its Zacks Rank #2 (Buy) standing heading into its earnings release.

 

 

 

 

User Growth

Along with its top and bottom lines, we need to know what to expect from Facebook’s user metrics. The company’s daily active users in the U.S. and Canada are projected to jump from 185 million in Q2 2018 to 186.25 million, according to our Key Company Metrics estimates. This would also mark a slight jump from Q1 and Q4 2018’s 186 million in the region that accounted for roughly 49% of Q1 revenue.

Facebook’s DAU total in Europe is expected to climb from 279 million in the year-ago quarter to 285.10 million. Despite the solid expansion from Q2 2018, FB’s European daily active user figure is projected to slip from Q1 2019’s 286 million in the area that made up 24% of the social media firm’s first-quarter revenue. Investors should note that FB has seen quarter over quarter DAU declines before.

In the firm’s Asia-Pacific area, Facebook’s DAU total is projected to climb roughly 12% from 546 million in Q2 2018 to 612.68 million. This would also represent a 12.68 million user jump from last quarter. Lastly, FB’s “Rest of the World” region is projected to expand from 461 million to 499.16 million, which would represent an 8% climb from the prior-year quarter and a 9.16 million expansion against Q1.

Along with DAU totals, Wall Street will pay close attention to FB’s monthly active user metrics, which are projected to reach 2.41 billion. This would mark 8.1% growth from Q2 2018’s 2.23 billion and a solid jump from Q1’s 2.38 billion. Plus, our estimates would see Facebook post the same MAU percentage growth as it did last quarter, which is a great sign and helps prove how valuable Instagram and some of the company’s other services have become.

Bottom Line

Shares of FB have climbed 54% so far this year. And Facebook stock closed regular trading Monday up 2% at $202.32 a share, down just around 7% off its 52-week intraday highs of $218.62. Clearly, FB stock has been on a tear in 2019 and its user growth outlook appears relatively strong.

As always, investors need to pay close attention to updated guidance, especially on the profit side.  Facebook is scheduled to post its official Q2 2019 results after the market closes on Wednesday, July 24.

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