Social media behemoth Facebook is slated to release its fourth-quarter earnings report after the closing bell on Wednesday. Given the company’s promise to increase spending in response to security and content concerns, these latest quarterly results could be a turning point for the stock.
Facebook’s spending pledge comes on the back of widespread criticism over the platform’s failure to properly vet content. Most notably, Facebook users were reportedly exposed to a Russian propaganda campaign during the 2016 U.S. election cycle.
“We're serious about preventing abuse on our platforms. We're investing so much in security that it will impact our profitability. Protecting our community is more important than maximizing our profits,” said CEO Mark Zuckerberg in the company’s third-quarter earnings release.
This promise is probably a good sign for Facebook’s long-term user experience, but increased spending typically concerns investors in the interim. We should expect Wall Street to react to any additional details that Wednesday’s report reveals on this front.
Meanwhile, Facebook shares typically respond to news of the social media site’s user growth. Facebook eclipsed the two-billion user threshold last year, but company has continued to post remarkable MAU gains every quarter.
Still, it can be argued that neither user growth nor increased security spending will be the most important takeaway from Facebook’s fourth-quarter report. If Facebook investors truly want to gauge how the company’s recent initiatives are working, the firm’s average revenue per user (ARPU) figure might be the biggest metric to watch.
Facebook has spent the better part of the last two years transitioning to a video-first focus. The amount of individual users and business pages creating and sharing videos has exploded, and the company itself has invested mountains of cash into developing original video content and live-streaming content for its site.
Facebook’s reported ARPU helps show whether this strategy is paying off because video advertisements typically cost more than traditional banner ads. If advertisers are paying a premium for these more sought-after ads, Facebook’s ARPU should be on the rise.
With that said, we can prepare for this key element of the report by taking a look at our exclusive non-financial metrics estimate file. The Zacks Consensus NFM file contains detailed estimate data for business segment metrics and non-financial metrics reported by companies. For more info on our file, check out zacks.com/non-financial-metrics.
Based on our current NFM estimates, we expect Facebook to report ARPU of $5.89 for the fourth quarter. This result would mark growth of 21.9% year-over-year and 16.2% sequentially.
This level of growth is obviously impressive, and going forward, ARPU growth will become more important when user growth eventually plateaus. For now, however, ARPU growth and rising user figures help explain why Facebook is able to consistently witness strong overall revenue growth.
For more clues on where Facebook’s fourth-quarter growth will come from, check out our full guide: 3 Key Estimates for Facebook's Q4 Earnings Report
Want more analysis from this author? Make sure to follow @Ryan_McQueeneyon Twitter!
Don’t Even Think About Buying Bitcoin Until You Read This
The most popular cryptocurrency skyrocketed last year, giving some investors the chance to bank 20X returns or even more. Those gains, however, came with serious volatility and risk. Bitcoin sank 25% or more 3 times in 2017.
Zacks’ has just released a new Special Report to help readers capitalize on the explosive profit potential of Bitcoin and the other cryptocurrencies with significantly less volatility than buying them directly.
See 4 crypto-related stocks now >>
Image: Bigstock
One Key Earnings Figure to Watch in Facebook's Q4 Report
Social media behemoth Facebook is slated to release its fourth-quarter earnings report after the closing bell on Wednesday. Given the company’s promise to increase spending in response to security and content concerns, these latest quarterly results could be a turning point for the stock.
Facebook’s spending pledge comes on the back of widespread criticism over the platform’s failure to properly vet content. Most notably, Facebook users were reportedly exposed to a Russian propaganda campaign during the 2016 U.S. election cycle.
“We're serious about preventing abuse on our platforms. We're investing so much in security that it will impact our profitability. Protecting our community is more important than maximizing our profits,” said CEO Mark Zuckerberg in the company’s third-quarter earnings release.
This promise is probably a good sign for Facebook’s long-term user experience, but increased spending typically concerns investors in the interim. We should expect Wall Street to react to any additional details that Wednesday’s report reveals on this front.
Meanwhile, Facebook shares typically respond to news of the social media site’s user growth. Facebook eclipsed the two-billion user threshold last year, but company has continued to post remarkable MAU gains every quarter.
Still, it can be argued that neither user growth nor increased security spending will be the most important takeaway from Facebook’s fourth-quarter report. If Facebook investors truly want to gauge how the company’s recent initiatives are working, the firm’s average revenue per user (ARPU) figure might be the biggest metric to watch.
Facebook has spent the better part of the last two years transitioning to a video-first focus. The amount of individual users and business pages creating and sharing videos has exploded, and the company itself has invested mountains of cash into developing original video content and live-streaming content for its site.
Facebook’s reported ARPU helps show whether this strategy is paying off because video advertisements typically cost more than traditional banner ads. If advertisers are paying a premium for these more sought-after ads, Facebook’s ARPU should be on the rise.
With that said, we can prepare for this key element of the report by taking a look at our exclusive non-financial metrics estimate file. The Zacks Consensus NFM file contains detailed estimate data for business segment metrics and non-financial metrics reported by companies. For more info on our file, check out zacks.com/non-financial-metrics.
Based on our current NFM estimates, we expect Facebook to report ARPU of $5.89 for the fourth quarter. This result would mark growth of 21.9% year-over-year and 16.2% sequentially.
This level of growth is obviously impressive, and going forward, ARPU growth will become more important when user growth eventually plateaus. For now, however, ARPU growth and rising user figures help explain why Facebook is able to consistently witness strong overall revenue growth.
For more clues on where Facebook’s fourth-quarter growth will come from, check out our full guide: 3 Key Estimates for Facebook's Q4 Earnings Report
Want more analysis from this author? Make sure to follow @Ryan_McQueeneyon Twitter!
Don’t Even Think About Buying Bitcoin Until You Read This
The most popular cryptocurrency skyrocketed last year, giving some investors the chance to bank 20X returns or even more. Those gains, however, came with serious volatility and risk. Bitcoin sank 25% or more 3 times in 2017.
Zacks’ has just released a new Special Report to help readers capitalize on the explosive profit potential of Bitcoin and the other cryptocurrencies with significantly less volatility than buying them directly.
See 4 crypto-related stocks now >>