Facebook earnings preview: strong performance expected despite myriad of challenges

The US social media giant will report its Q4 earnings after the bell on Wednesday and despite the challenges the company has faced many on Wall St are expecting great things from its latest trading update.

Late on Wednesday, Facebook will report its Q4 earnings in what has been a challenging year for the social media behemoth, which has had to face down controversy over its data and privacy policies.

But despite two years of negative press attention, Facebook is expected to record a strong set of financial results on Wednesday, with forecasters expecting the company to report earnings of $2.18 a share and revenues of around $16.4 billion, according to a poll of analysts by FactSet.

User stability and ad growth crucial for Facebook

If Facebook can deliver on expectations, it would signal that the company has come out the other end of what has been a tough 12 months.

‘We believe usage trends across Facebook's platforms have remained relatively stable and expect strong growth at both core Facebook and Instagram to drive nearly 28 percent year-over-year constant currency ad growth in 4Q,’ KeyBanc Capital Markets analysts Andy Hargreaves and Tyler Parker wrote in a note.

Facebook’s strong track-record of beating earnings estimates

Analysts are expecting good things from Facebook’s latest trading update and if the company’s past performance is anything to go by the social media giant is likely to please investors on Wednesday.

According to research carried out by Bespoke Finance Group, the company has an earnings beat rate of 96% and averages a 2.8% increase in share price the day after announcing its result, with that figure rising to 5.4% when it releases its fourth quarter update.

In terms of sales, Facebook has beaten forecasts 88% of the time, with that figure impacted by the fact the company has missed its estimate in the last two quarters.

‘Weakening revenue growth is one of the reasons the stock struggled so much in the second half of 2018,’ Bespoke said.

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