Facebook is expected to report third-quarter financial results after the closing bell on Wednesday. Analysts are expecting the social media giant's dominant digital advertising business to deliver steady revenue for the period.
The company's stock has proved resilient in 2019 in the face of intensifying political scrutiny, with shares up more than 42% year-to-date.Here's what five Wall Street analysts are saying ahead of Facebook's latest earnings results.
Facebook is scheduled to release its third-quarter earnings report after the closing bell on Wednesday.
Leading up to the results, analysts appear optimistic that the social media giant's robust advertising business will continue to produce steady revenue as it explores monetizing other properties such as Instagram, Messenger, and WhatsApp.
The chart below shows the growth expectations BMO Capital Markets has assigned to each:
In addition to money-making efforts, investors will also be looking to see if the company can continue to grow its massive monthly active user base of 2.7 billion across all of its platforms.
There will also be a focus on any commentary around how Facebook plans to handle several antitrust investigations from the Department of Justice, Federal Trade Commission, and dozens of attorneys general from US states and territories.
The stock fell as much as 4.4% in late October after an antitrust probe led New York Attorney General Letitia James expanded to include 47 state attorneys general.
Facebook CEO Mark Zuckerberg testified in front of Congress last week to address concerns about Libra, the company's cryptocurrency initiative. Libra has seen an exodus of major backers in recent months including PayPal, Mastercard, and Visa.
Despite the continuing onslaught of political and regulatory pressure this year, Facebook's stock has proved resilient. The company's shares are up more than 44% year-to-date.
The company warned on its second-quarter earnings call that it expects revenue growth to decelerate going forward, particularly during the fourth quarter and into 2020 due to ad targeting challenges.
Wall Street expects Facebook to report about $6.61 billion in profit on $17.35 billion in revenue for the third quarter. The company posted $13.7 billion in revenue and $5.14 billion in profit during the same period last year.
Here's what analysts are talking about ahead of the report:
Credit Suisse: "Our primary focus is a return to FCF growth in 2020 after a two-year period of investment."
Price target: Raised to $260, from $250
"We maintain our Outperform rating based on the following: potential better-than-expected ad revenue growth on product innovation (Instagram Checkout, Search in Marketplaces, etc.), Street models are too conservative and underestimate the long-term monetization potential of other billion-user properties like Messenger and WhatsApp, accelerating free cash flow growth in 2020," Credit Suisse analysts wrote in a note to clients on October 29.
The analysts added: "Our primary focus is a return to FCF growth in 2020 after a two-year period of investment."
Goldman Sachs: "We once again see potential for upside to our above consensus numbers."
Price target: $231
"We once again see potential for upside to our above consensus numbers, as our field checks point to steady performance on Facebook, and continued outsized growth on Instagram and Stories," Goldman Sachs wrote in a note to clients on October 17.
The analysts added: "We expect management to remain conservative in its commentary around revenue growth, as the company has already called for continued deceleration through 2019."
RBC Capital Markets: "The 2.7B MAU's between Facebook Messenger and WhatsApp represent significant monetization opportunities."
Price target: $260
"Together, the 2.7B MAU's between Facebook Messenger and WhatsApp represent significant monetization opportunities," RBC Capital Markets analyst Mark Mahaney wrote in a note to clients on October 27.
Mahaney continued: "How material could Facebook Messenger be alone? We believe it could contribute an incremental $6-8B in Revenue and $1 in EPS to the company by 2020."
BMO: "We are raising our estimates to reflect our view that the ad market remains strong overall."
Price target: Bumped to $197, from $195
Rating: Market Perform
"We are raising our estimates to reflect our view that the ad market remains strong overall, but we continue to expect 3Q revenue to decelerate slightly," BMO Capital Markets wrote in a note to clients on October 28.
BMO added: "On margins, we expect them to continue to decline in 2020 (vs. Street expectations for a rebound), and therefore, we remain comfortable at Market Perform."
SunTrust: "We believe advertiser demand has remained strong throughout the period."
Price target: $236
"While FB's user base is already at massive scale, we believe MAUs will continue to inch higher, grow across all geographies despite continued regulatory scrutiny," Analysts at SunTrust Robinson Humphrey said in a note to clients on October 28.
They continued: "Strength is being led by IG, Video, and Product Ads; with DR advertisers starting to show more interest in IG. We believe advertiser demand has remained strong throughout the period."