Wednesday, January 29, 2014
Jeff Macke writes hatFacebook (FB) reports tonight and Wall Street is all atwitter over what the original publicly traded social media company might say.
Analysts are officially looking for EPS of 27-cents on $2.3b in revenue, but what Wall Street really wants is another reason to get excited about the company beyond the P&L. It’s been six months since Facebook’s transcendent second quarter of ’13 when the company proved mobile advertising was a real business. Those not only legitimized Facebook’s business model but also triggered a double in Facebook and paved the way for Twitter’s (TWTR) IPO.
Scott Kessler of S&P Capital IQ thinks the company is going to say more great stuff about mobile ads including specifics on customer bang for the buck, but he still has the stock at “hold.” It’s a matter of good news already priced into a company valued at more than $100 billion.
“Increasingly they’re going to be focused on talking more about Instagram,” says Kessler in the attached clip. For those unfamiliar with the Facebook story, assuming such people exist, the purchase of Instagram has kept the company socially relevant among the teen set. Buying the photo-sharing service looked like a $1 billion bungle by CEO Mark Zuckerberg at the time but it turned out to be a steal by most measures.
To dazzle Wall Street, Facebook is either going to need to pull another acquisition out of the air or come up with a whole new vertical business. Zuckerberg and Co. have beaten estimates by more than 30% each of the last two quarters, making it doubtful just another earnings surprise will be enough to push shares to new highs.