Facebook (FB) reports earnings today after the market close for just the second time since going public last May. Expectations are low, to say the least. The consensus estimates are $0.14 EPS on $1.37billion in revenue. If you take them off the record and ask them what they really think, many, if not most analysts think the risk is that Facebook misses published expectations.
With over 1 billion shares coming out of lock-up over the next few weeks FB enthusiasts are looking at a double whammy of bad fundamentals meeting an increased supply of shares. In the attached video Eric Jackson, founder of Ironfire Captial says the Street is unlikely to give Facebook a pass on poor results.
Unlike a company like Amazon (AMZN) where investors seem to ignore high multiples out of their respect for CEO Jeff Bezos' track record, Facebook founder and CEO Mark Zuckerberg still has to prove he's ready for prime time. It took 10 years and a move from "the world's biggest bookstore" to "the world's best retailer" for Bezos to get the benefit of the doubt. Facebook doesn't have anywhere near that level of credibility.
Jackson has a 3 point checklist of what he wants to hear before he gives FB a second look:
1. A boost in ad impressions
2. Increased revenue per users in the Western world, where FB's growth is slowing
3. Case studies of specific companies spending money on Facebook's ad platforms and seeing immediate payoffs
If Facebook can't give investors any of those later today, Jackson thinks investors are in trouble. "A billion shares are going to be coming to market between now and Thanksgiving; you don't want to be in front of that," he warns.
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