Facebook share price: Analysts predict $1.9 billion in third-quarter revenues

By: Anton Aleksandrov
Anton Aleksandrov
Anton is a freshly graduated economist from the States with passion for the world of finance. He is one… read more.
on Oct 28, 2013

iNVEZZ.com Monday October 28th: Facebook’s share price (NASDAQ:FB) has almost doubled over the last three months, with the world’s biggest social network finally earning Wall Street’s favour in the second quarter of this year. The third-quarter results due to be published this Wednesday, October 30, will likely confirm whether Facebook has truly struck a winning formula in mobile advertising.

“They’ve got to prove to investors that they can continue with the growth they demonstrated from the last quarter,” says Bob Bacarella, portfolio manager of the Monetta Fund, as quoted by Reuters. “From the way the stock is priced today, the expectations are generally that they will beat or exceed numbers handily.”
The mean projections from Wall Street analysts for Facebook’s third quarter results are $1.89 billion (₤1.17 billion) in revenue and $0.18 earnings per share. The social network provider has beaten analysts’ expectations for the past four quarters, with a particularly strong showing in Q2 this year, when revenues checked in at $1.8 billion (₤1.11 billion), $200 million (₤124 million) above forecasts.

Revenues from mobile advertising are expected to have grown at least five-fold year on year, with a number of estimates ranging between $760 million and $840 million (₤470-₤519 million). Some investors are hoping for an even bigger number. “What I’ve been telling folks is that, in general, $850 million-plus [₤525 million] is the number that’s needed, maybe even $900 million-plus [556 million],” Reuters quoted Macquarie Research analyst Ben Schachter as saying.

Facebook has managed to capitalise on the increasing mobile traffic by introducing the newsfeed ads – marketing messages showing up directly in a user’s stream of news and content and ideally suited for the smaller screens of smartphones. “Facebook has done itself quite a good turn by listening to investors and giving them what they’re looking for, which is increasing mobile ad revenue,” observes Wedbush Securities analyst Michael Pachter.

In addition to the mobile ad numbers, investors will also be looking for details of other money-making activities, including video ads and solutions aimed at bettering the monetising of Instagram’s popularity. Facebook said earlier this year that major brands such as Levi’s, Lexus and Adidas would begin showing ads on Instagram in the coming weeks. Mark Mahaney, an analyst at RBC Capital Markets, was quoted by Reuters as saying that Instagram could generate about $1.7 billion (₤1.05 billion) in annual revenues in 2015, roughly 13 percent of the company’s total earnings.

**Analysts on Facebook**
Goldman Sachs rated Facebook’s shares as a ‘buy’ in a research note issued to investors on Thursday last week. The bank has a $58.00 price target on the stock.
Overall, 11 equities analysts have given Facebook a ‘hold’ rating and 33 have assigned a ‘buy’ rating. The stock has a consensus rating of ‘buy’ and an average target price of $49.87.
**As of Friday, 25.10, buy Facebook shares at $51.84.**
**As of Friday, 25.10, sell Facebook shares at $51.77.**
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