Forecasted Facebook Earnings for 2019
Author: Mandy Fong. Mandy is a student at the University of London, studying Banking and Finance.
Facebook is primarily driven by advertising revenue, and the company has been under fire for neglecting to adequately monitor its ads and content for narratives that harm society. New regulations affecting data privacy will affect quarterly revenue growth, but will most likely not have a significant negative impact over the long term. Facebook has proven to be resilient and adaptable in the current macroeconomic environment with past user and revenue growth despite regulatory pressure.
Overall, revenue estimates are in line with consensus estimates. Monthly active users (MAUs) are believed to continue to increase at a relatively stable rate, though the average revenue per user (ARPU) growth rate is continuing to decrease in line with estimates. Europe, USA, and Canada are expected to reveal lower growth rates starting in Q1 2019 due to persisting public criticism concerning harmful digital advertising. Relatively weaker European currencies are possible in 2019, arising from political instability with Brexit, the rise in populism, and the European elections. This would negatively impact European revenues.
However, there is a reason to be optimistic about revenue going forward in the long term. Instagram Stories is growing very quickly with 2 million early adopter advertisers and there are expectations for greater possibilities of revenue in e-commerce. Facebook does not disclose the breakdown of advertising revenue based on platform, but Instagram’s user engagement is very strong despite having less than half of Facebook’s MAUs. Revenue is dependent on ad impressions and in Q4 2018, impressions growth was primarily driven by ads on Instagram (regular and Stories), as well as Facebook mobile News Feed ads. It can be expected that the continued growth of the Instagram platform will become a key driver of revenue in the future.
On the expenses for 2019, management guidance is around 40% to 50% growth compared to 2018. Mid-range growth (around 45%) can be expected while Facebook continues to try to limit disinformation and improve privacy, especially with investments in programs attributed to research and development. New tech innovations in AR and VR are also persistent expenses that will continue to affect expense growth. To accompany this, general and administrative expenses will grow at a relatively constant pace with new personnel hires.
Market research expenses are early highlights for 2019, affecting the first quarter especially. Facebook had to end several user data collection methods (Facebook Research, Onavo). With continued media scrutiny, Facebook will have to make more changes with regard to user privacy that will further increase expenses.
To sum up with the most early forecasted earnings, Facebook is expected to report $1.66 EPS with $15.167 billion in revenue for Q1 2019.
Overall, revenue estimates are in line with consensus estimates. Monthly active users (MAUs) are believed to continue to increase at a relatively stable rate, though the average revenue per user (ARPU) growth rate is continuing to decrease in line with estimates. Europe, USA, and Canada are expected to reveal lower growth rates starting in Q1 2019 due to persisting public criticism concerning harmful digital advertising. Relatively weaker European currencies are possible in 2019, arising from political instability with Brexit, the rise in populism, and the European elections. This would negatively impact European revenues.
However, there is a reason to be optimistic about revenue going forward in the long term. Instagram Stories is growing very quickly with 2 million early adopter advertisers and there are expectations for greater possibilities of revenue in e-commerce. Facebook does not disclose the breakdown of advertising revenue based on platform, but Instagram’s user engagement is very strong despite having less than half of Facebook’s MAUs. Revenue is dependent on ad impressions and in Q4 2018, impressions growth was primarily driven by ads on Instagram (regular and Stories), as well as Facebook mobile News Feed ads. It can be expected that the continued growth of the Instagram platform will become a key driver of revenue in the future.
On the expenses for 2019, management guidance is around 40% to 50% growth compared to 2018. Mid-range growth (around 45%) can be expected while Facebook continues to try to limit disinformation and improve privacy, especially with investments in programs attributed to research and development. New tech innovations in AR and VR are also persistent expenses that will continue to affect expense growth. To accompany this, general and administrative expenses will grow at a relatively constant pace with new personnel hires.
Market research expenses are early highlights for 2019, affecting the first quarter especially. Facebook had to end several user data collection methods (Facebook Research, Onavo). With continued media scrutiny, Facebook will have to make more changes with regard to user privacy that will further increase expenses.
To sum up with the most early forecasted earnings, Facebook is expected to report $1.66 EPS with $15.167 billion in revenue for Q1 2019.
Mandy Fong's Facebook Inc Earnings Model
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