Facebook (FB) is set to report first-quarter earnings on Wednesday, May 1, and as the company continues to make mobile a bigger part of its revenue, Wall Street will be looking to see whether ad revenue can keep up the strong pace from the fourth quarter.
The social networking giant is expected to earn 13 cents per share on $1.44 billion in revenue. The first-quarter is usually seasonally weaker than the fourth-quarter, when Facebook earned 17 cents per share on $1.585 billion in revenue. During that quarter, mobile revenue represented 23% of advertising sales, and Cantor Fitzgerald analyst Youssef Squali is expecting that to continue trending higher.
"We believe Mobile revenue should remain healthy, accounting for ~27% of all ad revenue," Squali wrote in his note. He notes that recent earnings reports from Yahoo! and Google should bode well for Facebook domestically, but that international may be a concern, given Facebook's large presence overseas. Facebook has over 1 billion monthly active users, the far majority of which are overseas. Squali rates shares buy with a $35 price target.
Raymond James analyst Aaron Kessler, who recently upgraded Facebook to buy, is also expecting strength in mobile this quarter, noting increased smartphone usage and ad load time. He's expecting mobile to account for 25.5% of ad revenue this quarter, up from 23% in the fourth quarter. "Based on our checks, we believe our and the Street’s estimates for mobile advertising will likely prove to be conservative," Kessler wrote in his note.
Though Facebook Home and Graph Search are recent announcements, analysts will be looking to hear whether either of these announcements are helping revenue trends, especially Facebook Home. Facebook Home was designed to increase engagement, particularly for active users. Facebook Home was announced April 5, so it'll be too late for the first-quarter, but perhaps CEO Mark Zuckerberg and team will give an update on it. At the press conference announcing Facebook Home, Zuckerberg said ads would eventually come to the product, though not right away.
Mobile advertising continues to remain weaker than desktop advertising, as evidenced by comments from Yahoo! CEO Marissa Mayer and Google's cost-per-click (CPC) trends. It'll be interesting to see whether Facebook, now that it is a mobile company, can trump the industry line, and demonstrate mobile strength.