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Facebook share price: 5 things to watch for in its Q1 results

Facebook's Q1 earnings report will have to answer these five questions from investors.

Facebook share price could rise or fall after its Q1 earnings report. Facebook’s Q1 results have to answer five important questions for investors.

Could data breach scandals impact Facebook’s Q1 earnings?

Facebook has been plagued with a series of data breach scandals. Facebook’s Q1 earnings could be impacted by the numerous cases of customer data being exposed without encryption.

Facebook’s Q1 profits could also be affected by allegations of using user data to leverage against rival companies. NBC News reported that chief executive officer( CEO), Mark Zuckerberg, threatened to withhold data from startup company Six4Three and give customer data to favored businesses. Paul Grewal, vice-president at Facebook, denies the allegation.

'As we've said many times, Six4Three - creators of the Pikinis app -cherry-picked these documents from years ago as part of a lawsuit to force Facebook to share information on friends of the app's users. The set of documents, by design, tells only one side of the story and omits important context,’ said Grewal.

According to CNBC, advertisers are still flocking to Facebook despite the controversy because of the site’s global reach to potential customers. The data breaches also didn’t greatly affect Facebook’s Q4 2018 earnings. Investors will be eager to see if the data breach scandals will impact Facebook’s Q1 earnings.

Will cybersecurity expenses hurt Facebook’s Q1 profits?

After the user data exposure in Q4 2018, Zuckerberg vowed Facebook would spend $3.8 billion on cybersecurity.

‘The last few years and next year [2019] are probably going to be the biggest growth in the investment in the security efforts that we will see,’ said Zuckerberg.

The expenses caused by security measures may calm users, but may greatly affect Facebook’s Q1 revenue.

Can politicians’ criticism affect Facebook’s Q1 earnings?

US and UK politicians have condemned Facebook for not acting fast enough to take down streaming video of the Christchurch, New Zealand mosque attacks. Facebook has also been criticised for delayed action in taking down pages with white supremacist hate speech.

Laura Martin, an analyst with Needham Investment Bank, said that regulatory actions against the social media company could influence Facebook’s Q1 earnings.

‘It is popular with politicians to bash Facebook. Each incremental demand by regulators costs [Facebook] shareholders more money (ie, lower margins) and causes senior managers to react to past events rather than moving forward,' noted Martin.

It remains to be seen if the barrage of criticism from lawmakers will have a financial impact on Facebook’s Q1 revenue.

Will new products and streaming TV increase Facebook’s Q1 revenue?

Facebook has been branching out from social media to introduce new devices and streaming services. To compete with Netflix, the company has Facebook Watch, a streaming outlet with original content for users. The corporation also is offering an alternative to Apple devices with Facebook Portal, a video chat device.

Though Facebook Portal’s sales are slow, Facebook Watch has been successful with actress Jada Pinkett Smith’s ‘Red Table Talk’ attracting seven million viewers in March. Investors will see if Facebook’s branching out into other ventures has paid off.

Can a housing bias lawsuit impact Facebook's Q1 earnings?

In addition to the data scandals, Facebook is also facing a housing discrimination lawsuit as well. The US Housing and Urban Development agency is accusing Facebook of violating the Fair Housing Act by placing discriminatory ads from landlords. Facebook denies the accusation and has pledged to eliminate racist advertising from the platform.

Wall Street will be monitoring Facebook’s Q1 earnings to see if the company can withstand its numerous issues.

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

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