Image: Marcio Jose Sanchez/Associated Press
Facebook should be feeling good right about now. The stock is hovering near an all-time high. The company has proven it can adapt to mobile. And Facebook is less than a week away from celebrating its 10th anniversary, a milestone that many Internet companies never reach.
Yet, from the headlines in recent months, you'd think Facebook was on the verge of some existential disaster. Ever since Facebook's CFO admitted during the last earnings call in October that there had been "a decrease in daily users partly among younger teens," speculation has run rampant about the extent of Facebook's "teen problem."
Analysts may press Facebook Wednesday, during its fourth-quarter earnings call, to address this question again. It may also have the opportunity to shift the narrative, depending on the strength of its results.
"On the earnings call, we expect more color on issues such as 1) 'teen engagement'; 2) ad load in News Feeds; and 3) video ads on Instagram and Facebook," Arvind Bhatia, an analyst with Sterne Agee, wrote in an investor note this week. While that first category may generate more headlines, the latter two are likely to be more significant to investors looking for Facebook's progress on new and existing revenue streams.
The consensus estimate on Wall Street is that Facebook will report earnings of $0.27 per share on revenue of $2.33 billion for the fourth quarter, the latter of which would represent a 56% increase year over year. Facebook is also expected to officially become a mobile-first company: Bhatia predicts that mobile ad revenue will represent 52% of total ad revenue for the quarter, its first time making up the majority.
Instagram, in particular, may be a point of interest during the call. More than a year after Facebook completed the acquisition of Instagram for $730 million, the photo-sharing service is finally positioned to start generating revenue for Facebook. Instagram says its early ad efforts are working well; now it's time to see whether Facebook provides more details on how well.
Facebook will also release data for the entire 2013 fiscal year. If the company meets Wall Street's estimates for the fourth quarter, it should report annual revenues of about $7.6 billion. By comparison, Facebook had its first $5 billion revenue year in 2012.
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