Facebook to meet Q2 expectations in first earnings report as a public company

Come Thursday, Facebook will give Wall Street exactly what it is expecting: a satisfactory earnings report, with second quarter revenue around $1.15 billion and earnings per share of $0.12, according to investment firm Wedbush.

Wedbush modeled Facebook’s Q2 revenue at $1.11 billion, but the firm actually expects the social network to meet or beat the industry consensus, per Thomson First Call, of $1.149 billion, which would show 28.5 percent year-over-year growth.

Wedbush has also given Facebook an outperform rating, meaning its stock is considered a moderate buy, and a 12-month target price of $44 per share.

“We think it is unlikely that Facebook will miss Q2 consensus estimates, which dropped after May 9’s revised Form S-1,” the firm said in its earnings preview report on the social network. Facebook declined to comment on the projections.

Brokerage firm Sterne Agee also expects Facebook’s Q2 results to be in line with consensus estimates. The firm’s projections are slightly higher, however, at $1.21 billion in revenue and earnings per share of $0.13 for the quarter. Analysts Arvind Bhatia and Brett Strauserad anticipate Facebook ad revenue to be $1.02 billion and payment revenue to be around $194 million. They rate Facebook a buy and have a 12-month price target of $46.

Facebook’s second quarter earnings report will be its first as a public company. Facebook went public on May 18 in a disappointing initial public offering riddled with glitches and besmirched by controversy.

Part of the drama had to do with Facebook’s earnings estimates for 2012. Underwriters, after learning that Facebook did not expect to meet its initial guidance on earnings for the year, lowered their second quarter estimates by as much as 7.28 percent, and reportedly shared that information with preferred investors. A May 9 amendment to Facebook’s prospectus broadly advised potential investors that mobile growth could cut into ad revenue, but the S-1 did not include the lowered estimates.

“The underwriters likely advised Facebook to beat Street expectations for its first public quarter; this became more achievable now that estimates have declined,” Wedbush researchers surmised.

That certainly appears to be the case. Should Facebook report $1.15 billion in revenue or higher for the second quarter, as is expected, the company’s report will fall right in line with the revised Q2 estimates that surfaced back in May, and Facebook will avoid disappointing Wall Street even more.

Facebook’s second quarter has been an eventful one. Most recently, the social network struck a deal with Yahoo to resolve a patent dispute, and Facebook’s chief operating officer, Sheryl Sandberg, was appointed to the company’s board. On the acquisition front, Facebook picked up facial recognition startup Face.com, purchased the young mobile gifting app Karma, bought location-based app Glancee, and grabbed Instagram to kick off the quarter (that deal is still pending). The company also invested heavily in talent with acqui-hires of the Lightbox, Bolt Peters, and Pieceable teams.

In the first quarter of 2012, Facebook made $205 million in net income on $1.06 billion in revenue. Facebook is trading at $28.50 at the time of this report.

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This post was updated with additional estimates from Sterne Agee.


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