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Facebook’s Q4 2014 earnings: Expect revenue growth and more

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Facebook’s Q4 2014 estimated financial results

Facebook (FB) is expected to announce its Q4 2014 earnings on January 28, 2015. In this series, we’ll analyze how the last quarter of 2014 could turn out. The last quarter of the year usually comes with holiday season and surges in monthly active users and engagement numbers for internet companies. Facebook and Twitter focus on user engagement.

In Q3, Facebook achieved strong results across the board, with 1.35 billion people now using Facebook each month and 64% using Facebook daily. On mobile devices, 1.12 billion people now use Facebook each month and 703 million people use it each day—representing nearly 40% growth from Q3 2013.

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Management’s guidance on Q4 earnings

In Facebook’s (FB) 3Q14 earnings conference call, the company’s CFO said that Facebook expects full year 2014 total GAAP[1. generally accepted accounting principles] expenses will grow approximately 45% to 50% versus full-year 2013. This increase from the prior range of 30% to 35% is primarily due to the impact of this WhatsApp acquisition on stock-based compensation charges in the fourth quarter.

Management expects that total revenue in Q4 2014 will grow in the range of 40% to 47% versus Q4 2013. Q4 2013 makes for a difficult comparison since it was the first holiday season with the rollout of news feed ads at scale. News Feed ads are somewhat similar to native ads, which integrate brand messages directly into the editorial flow of websites and social networks.

News Feed is the constantly-updated list of stories in the middle of a user’s homepage. News Feed includes status updates, photos, videos, links, app activity, and likes from people, pages, and groups that users follow on Facebook.

Wall Street’s estimates for Facebook’s 4Q14 revenues

According to consensus estimates of Wall Street analysts, FB will report fourth-quarter earnings of 48 cents per share on $3.78 billion in revenue, compared with 31 cents per share on $2.58 billion in Q4 2013.

For the full year, analysts believe Facebook will report EPS of 169 cents on $12.39 billion in revenue compared with 88 cents EPS on $7.87 billion in revenue in 2013. That’s almost a 90% increase in EPS and a 57% increase in revenue.

Facebook’s still showing decent revenue growth

Despite a slowdown in revenue growth, Facebook is still expected to show decent revenue growth compared to its other social network peers in 4Q14. As the chart above shows, LinkedIn (LNKD) is expected to grow its revenues by 35%, while Twitter (TWTR) should grow at 72% in the fourth quarter. Twitter actually increased its guidance for the fourth quarter recently. For more on this change, read Why did Twitter increase its guidance for 4th quarter 2014?

To gain portfolio exposure to Facebook, you can consider exchange-traded funds (or ETFs) such as the Technology Select Sector SPDR ETF (XLK), where FB has a weightage of 4%, and the PowerShares QQQ Trust, Series 1 (QQQ), with an FB weightage of 3.60%.

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