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Facebook (FB) to Report Q2 Earnings: What's in the Cards?

Facebook FB is set to report second-quarter 2020 results on Jul 29.

The company didn’t provide any specific revenue guidance for the second quarter of 2020 due to aggravating macro-economic uncertainty related to coronavirus.

Notably, the Zacks Consensus Estimate for revenues is pegged at $17.31 billion, indicating an increase of 2.5% from the year-ago quarter’s reported figure.

Additionally, the consensus mark for second-quarter earnings is pegged at $1.44 per share, having been revised 1.4% downward in the past 30 days, but indicating a whopping 58.2% rise from the figure reported in the year-ago quarter.

Notably, the company’s earnings missed the Zacks Consensus Estimate in two of the trailing four quarters while beating the same in the other two, the average negative surprise being 10.2%.

Let’s see how things are shaping up for the upcoming announcement.

Coronavirus to Hurt Ad Sales

Facebook is expected to have witnessed jump in the usage of its services like Messenger, Instagram and WhatsApp in the second quarter amid the growing incidence of coronavirus cases.

Notably, the social media giant launched its group video chat service, Messenger Rooms, which supports video calls with up to 50 participants with no time limit on call length.

Facebook also announced the expansion of Messenger Kids to more than 70 new countries.

The Zacks Consensus Estimate for second-quarter MAUs worldwide is pegged at 2.619 billion, suggesting a 0.6% rise sequentially. Moreover, DAUs worldwide is pegged at 1.734 billion, indicating no movement from the preceding quarter.

Nevertheless, Facebook expects ad sales for the to-be-reported quarter to take a hit from coronavirus-related headwinds. The company expects ad sales to be hurt by weakness in the travel and automotive industries.

Markedly, changes made by Apple AAPL and Alphabet’s GOOGL Google in their mobile operating systems and browser platforms have limited Facebook’s ability to track user-activity trend.

Moreover, a number of companies have announced plans to freeze ad spending on the social media platform due to its failure to eradicate hate speech and misinformation.

Both these factors are expected to have hurt Facebook’s advertising revenue growth in second-quarter 2020.

Facebook also faces significant competition from the likes of Google and Twitter TWTR for ad dollars. Notably, Twitter’s advertising revenues declined 23% year over year to $561.9 million in the recently-reported second quarter. During the last three weeks of June, advertising revenues declined 15% year over year. (Read More: Twitter’s Q2 Earnings Miss, Advertising Revenues Weak)

Nonetheless, Facebook’s solid user base in the Asia Pacific and growth in Instagram Stories and Feed are expected to reflect on the top line.

The consensus mark for this Zacks Rank #3 (Hold) company’s second-quarter advertising revenues is pegged at $16.97 billion, suggesting a 2.7% drop from the figure reported in the previous quarter but 2.1% rise  from the year-ago quarter level. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Key Q2 Developments

Facebook introduced Businesses Nearby that allows users to see the latest posts from businesses within a certain geographic radius.

The company also introduced Facebook Shop — a free service that makes it easy for businesses to set up a single online store to be availed by customers on both Facebook and Instagram.

Further, Facebook announced the launch of a WhatsApp-based digital payments service for the messaging app’s 120-million users in Brazil. However, the country’s central bank suspended the service within a week of release.

Facebook also announced Novi, previously known as Calibra. Novi is the digital wallet that will help people send and hold Libra digital currencies.

Moreover, the company announced the acquisition of GIF search engine GIPHY, which is now part of its Instagram team. Facebook also acquired mapping technology provider Mapillary.

Additionally, Facebook announced investment of $5.7 billion in Jio Platforms, a division of Reliance Industries, which received approval from India’s antitrust regulator.

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