Can Ad Revenues Do the Trick for Facebook (FB) Q1 Earnings?

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Facebook 's FB ad revenues are expected to hog the limelight as the company reports its first-quarter 2018 results on Apr 25.

Facebook has witnessed significant traction in online and mobile advertising spending in a short span of time. Notably, the company's mobile ad business has fast emerged as a major contributor to its advertising revenues.

In the last reported quarter, advertising revenues soared 48.1% year over year to $12.78 billion. Mobile ad revenues surged 57% year over year to $11.4 billion, contributing 89% to total ad revenues. Mobile-first video was 50% of the company's video ad revenues in the fourth quarter compared with 41% in third quarter.

The Zacks Consensus Estimate for advertising revenues for first quarter 2018 stands at $11.23 billion, up 43% from the year-ago quarter figure but down 12% when compared sequentially.

Click here to know how the company's overall Q1 performance is likely to be.

Let's Delve Deeper

Facebook's huge user base of over 2.13 billion combined with Instagram's strong user base of more than 800 million presents a much larger canvas for advertisers and makes the platform highly attractive.

Facebook's growing video initiatives are also driving video-based advertisements on the platform. Advertisers prefer video advertisements as these appear to be the most lucrative medium to attract the audience.

However, since data misuse allegations surfaced against the company in mid-March, there has been growing tension among investors as to whether it would have an adverse impact on the company's ad business.

CEO Mark Zuckerberg maintains that the company has not witnessed any significant user attrition or decline in ad spend post the Cambridge Analytica data fiasco or the #DeleteFacebook campaign.

Per Kenshoo, social ad spending in the quarter increased 37% year over year. Ad spending on Instagram doubled on the back of tripled growth in "clicks". Instagram Stories is also gaining traction. It also notes that out of the total social spending, video ad spending accounted for 41%.

We therefore expect ad revenues to have remained unaffected by the data fiasco, which surfaced toward the end of the quarter.

Facebook, Inc. Revenue (TTM)

Facebook, Inc. Revenue (TTM) | Facebook, Inc. Quote

Zacks Rank and Key Picks

Facebook carries a Zacks Rank #3 (Hold).

Better-ranked stocks from the same space are Paycom Software PAYC , Western Digital WDC and NETGEAR NTGR , all sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks Rank #1 stocks here.

While Paycom is set to release earnings on May 1, Western Digital will announce the same on Apr 26 and NETGEAR on Apr 25.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Business , Earnings , Stocks
Referenced Symbols: NTGR , WDC , FB , PAYC

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