Facebook (FB) is scheduled to report results of its third fiscal quarter after market close on Monday, October 25 with a conference call scheduled for 5 pm ET. What to watch for:
1. AD GROWTH SEEN SLOWING: Last quarter, Facebook reported earnings of $3.61 per share, beating consensus at that time of $3.02, on revenue of $29.08B that topped the $27.82B consensus forecast. The company said at that time that it expected its second half ad revenue growth to slow. "In the third and fourth quarters of 2021, we expect year-over-year total revenue growth rates to decelerate significantly on a sequential basis as we lap periods of increasingly strong growth. When viewing growth on a two-year basis to exclude the impacts from lapping the COVID-19 recovery, we expect year-over-two-year total revenue growth to decelerate modestly in the second half of 2021 compared to the second quarter growth rate," Facebook stated.
Current consensus EPS and revenue forecasts for Facebook's September quarter stand at $3.19 and $29.58B, respectively, according to data provided by Refinitiv.
2. APPLE IMPACT: Facebook said along with its Q2 report: "We continue to expect increased ad targeting headwinds in 2021 from regulatory and platform changes, notably the recent iOS updates, which we expect to have a greater impact in the third quarter compared to the second quarter. This is factored into our outlook. As noted in recent earnings calls, we continue to monitor developments regarding the viability of transatlantic data transfers and their potential impact on our European operations."
On October 22, Facebook shares slid following Snap's (SNAP) quarterly report. Snap's Q3 results suggest a "more challenging earnings season," especially for names exposed to direct response advertisers, Piper Sandler analyst Thomas Champion told investors in a post-earnings research note. The analyst believes Apple's data tracking changes flagged by Snap "raise the level of uncertainty and may worsen before workarounds take hold."
On October 7, JPMorgan analyst Doug Anmuth noted that Facebook shares were up 22% year-to-date at that time, but down 13% from their recent highs amid "considerable negative news flow." Going into the Q3 report, the analyst said at that time that he was "comfortable" with his Q3 revenue estimate of $29.5B and he does not believe investors are expecting much upside. Heading toward earnings, the setup is "fairly different" with the shares closer to $330 than $380, said Anmuth. The analyst recommends buying Facebook on the pullback, saying the negative news flow has been seen before and that Facebook itself continues to call for regulation. Anmuth keeps an Overweight rating on the shares with a $450 price target.
3. FACEBOOK PAPERS, WHISTLEBLOWER: A consortium of news outlets, including The Wall Street Journal and Washington Post, have recently been publishing a series of critical "Facebook Papers" stories based on internal Facebook documents brought to light by company whistleblower Frances Haugen and other sources.
On October 5, Lena Pietsch, director of policy communications at Facebook, commented in a statement: "Today, a Senate Commerce subcommittee held a hearing with a former product manager at Facebook who worked for the company for less than two years, had no direct reports, never attended a decision-point meeting with C-level executives - and testified more than six times to not working on the subject matter in question. We don't agree with her characterization of the many issues she testified about. Despite al l this, we agree on one thing; it's time to begin to create standard rules for the internet. It's been 25 years since the rules for the internet have been updated, and instead of expecting the industry to make societal decisions that belong to legislators, it's time for Congress to act."
Many of the latest "Facebook Papers" stories over this weekend - including reports from WaPo, the Journal, the New York Times and AP - were about what the company knows about its impacts in India.
4. WILL IT STILL BE CALLED FACEBOOK?: On October 20, The Verge's Alex Heath reported, citing a source with direct knowledge of the matter, that Facebook is planning to change its company name to reflect its focus on the metaverse as soon as this week at "Connect," its annual AR/VR conference. The rebrand would likely position the blue Facebook app as one of many products under a parent company overseeing groups like Instagram, WhatsApp, Oculus, and more, similar to the rebranding that made Alphabet (GOOG, GOOGL) the name of the parent company of Google.
Subsequently, Platformer's Casey Newton reported, citing his own sources, that Facebook CEO Mark Zuckerberg had not settled on a new name for Facebook, though Newton said in his report that a new name could be announced as early as Monday. The company has been seriously discussing the rebranding move for at least the past two months, sourced told Newton.
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