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Will International User Growth Aid Facebook (FB) Q1 Earnings?

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Zacks Equity Research
·4 min read
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Facebook FB is set to report first-quarter 2020 results on Apr 29.

The company’s growing popularity in international markets, particularly Asia, is expected to have expanded its user base in the to-be-reported quarter.

The Zacks Consensus Estimate for Monthly Active User (MAU) in Asia stands at 1.072 billion, indicating 9.3% growth from the year-ago quarter’s reported figure. Additionally, the consensus mark for Rest of World MAU is pegged at 831 million, indicating 8.2% growth from the year-ago quarter’s reported figure.

Further, strength in user base is expected to reflect on advertising revenue growth despite the negative impact of the coronavirus pandemic on ad spending and ad targeting-related headwinds. Notably, changes made by Apple AAPL and Alphabet’s GOOGL Google in their mobile operating systems and browser platforms limited Facebook’s ability to track the user activity trend.

Facebook, Inc. Revenue (TTM)

Facebook, Inc. Revenue (TTM)
Facebook, Inc. Revenue (TTM)

Facebook, Inc. revenue-ttm | Facebook, Inc. Quote


The consensus mark for advertising revenues in Asia is pegged at $3.26 billion, suggesting 22.2% growth from the year-ago quarter’s reported figure. Moreover, the Zacks Consensus Estimate for advertising revenues in Europe is indicative of 15.4% growth to $4.16 billion from the year-ago quarter’s reported figure.

Click here to know how the company’s overall first-quarter performance is likely to be.

Will Video & Security Initiatives Aid Ad Revenues?

Facebook’s user base of more than 2.7 billion (including its Family of services, namely Instagram, WhatsApp and Messenger) presents a larger canvas for advertisers and makes the platform highly attractive.

The company continues to bolster video initiatives in a bid to generate further advertisement revenues. Advertisers prefer video advertisements as these appear to be the most lucrative medium to attract audiences.

As video ads generate more revenues than photo and text-based substitutes, Facebook is trying to incorporate more and more video-oriented content to fetch in more ad revenues. The company faces significant competition in online video ad market from the likes of YouTube, Roku, Amazon AMZN, Twitter, Pinterest and Snap.

The company’s Watch, a dedicated tab for video viewing, is acting as a tailwind as well as increasing popularity of Stories. Further, Facebook’s product named Automated Ads for small businesses remains noteworthy.

Notably, during the quarter to be reported, Facebook also extended its support for small businesses that are hard hit by the coronavirus. The company announced the launch of a $100-million worth program consisting of cash grants and ad credits in order to bail out small businesses.

Additionally, the company planned initiatives to improve privacy, transparency and authenticity of ads and remove fake accounts from the platform. It also made huge investments in AI systems to eliminate harmful content.

Further, the rollout of the “Off-Facebook Activity” tool that enables users to better control their privacy is expected to have helped boost user confidence. However, this hurts Facebook’s user-activity tracking capability, thereby hurting top-line growth.

Although Facebook expects its ad sales for the to-be-reported quarter to take a hit from lockdown and mass quarantine measures undertaken in a number of countries to curb the coronavirus spread, the Zacks Rank #3 (Hold) company’s aforesaid efforts are expected to limit the negative impact moving ahead. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for Facebook’s first-quarter advertising revenues is currently pegged at $17.52 billion, indicating decline of 18.4% from the previous quarter’s reported figure.

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