) is set to release its fiscal third quarter 2012 results after
the closing bell on October 23, 2012.
Prior Quarter Recap
In the second quarter, Facebook's revenue jumped 32.3% year
over year to $1.18 billion, which was primarily driven by strong
advertising revenue. Reported revenue was also ahead of the Zacks
Consensus Estimate of $1.15 billion.
However, owing to the increased costs and higher-than-expected
operating expenses, Facebook lost 8 cents per share (including
stock-based compensation, payroll taxes and income tax
adjustment,) compared with earnings of 11 cents per share in the
year-ago quarter. Moreover, the loss per share was significantly
wider than the Zacks Consensus Estimate of earnings of 9 cents
For the forthcoming quarter, Facebook expects operating
expenses to increase at a much faster rate compared to the second
quarter. The company expects steep rise in research &
development expenses mainly due to continued investments in
product development for mobile segment and infrastructure.
For further details please read:
Decent 2Q for Facebook
Estimate Revision Trend
In the last 30 days, only one out of the 16 analysts covering
the stock revised estimates downward for the third quarter. The
Zacks Consensus Estimate for the quarter remained at 7 cents per
Analysts covering the stock remain cautious about Facebook's
mobile monetization initiatives. The analysts expect revenue from
mobile to be a long-term positive catalyst. However, analysts
expect revenues from the segment to restrict the top-line
expansion in the near term. Analysts also expect margins to be
under pressure due to the rising investments. However, with a
huge user base, Facebook is set to benefit in the long term.
We believe that Facebook has significant growth opportunities
from increasing online advertising spending as compared to
traditional formats. Facebook's massive user base and its ability
to track personal details over time make it a formidable force in
the online ad market. Facebook can use this massive database to
help advertisers target relevant ads going forward.
However, Facebook is facing significant competition in the
display advertising market from
). Rising concerns over the effectiveness of Facebook ads as
compared to Google's AdSense have been a headwind lately. Apart
from increasing competition, lack of visibility around mobile
monetization remains a concern. Moreover, continued investments
to expand mobile offerings are expected to hurt margins in the
We remain Neutral over the long term (6-12 months). Currently,
Facebook has a Zacks #3 Rank, which implies a Hold rating in the
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