Q1 Facebook Earnings: It's All About the Ads

All focus will be on the ad revenue for Facebook Q1.

Charts (5)

When:

April 29th After market close


Q1 Expectations:
  • Revenue $17.82 billion
  • EPS $1.18

Its All About the Ads
Facebook is both benefiting and being battered by coronavirus. On the one hand Facebook is expected to report a surge in engagement levels on many of its services. Usually an increase in active users goes hand in hand with a rise in advertising revenue.

However, its ad revenue is expected to take a big hit. This is important because ad revenue accounts for nearly all of Facebook’s total revenue. In lock down many firms are cutting costs and ad spending is being slashed. Year over year ad revenue figures will help gauge the degree that ad spend is taking a hit. 
In Q4 Facebook revenue increased 25% yoy. Even before the coronavirus outbreak Facebook had said that they expected a deceleration in Q1 yoy revenue growth to around 20% -24%. This is now out of date and analysts’ expectations are for revenue growth of 16.9%.

Does Snap’s performance bode well for Facebook?
However, it is worth considering that Snap, which reported earlier this week and whose dominant revenue stream is also advertising reported better results than expected. A 44% jump in revenue was well received by the market and sent the stocks soaring 27% and Facebook piggy backed the rally 6% higher. That said, on the earnings call Snap confirmed that “many advertising budgets declined due to covid-19”, which suggests that the jump in revenue was a owing to a strong start to the year. Which doesn’t necessarily bode well for Facebook.

Q2 
Given that lock down only kicked off in the last few weeks of March, the biggest hit to ad spend is likely to come in Q2. Meaning forward guidance will be key. Analysts have predicted that Facebook’s revenue could rise just 5.8% next year as company’s struggle to recover from the Covid-19 crisis. Will Facebook be more optimistic? Or will they decline to comment given the lack of visibility? 

Chart thoughts
After touching 52 week low on March 18th $137.1, stock has gained 30% in less than a month. The trend is clearly bullish with the path of least resistance pointing higher.
Immediate resistance can be seen at 184.60 (yesterday’s high) followed by 196.00 (high on 3rd March)
Immediate support can be seen at 180.50 (trend line) prior to 168.38 (low 21st April).


 

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