Strong Q1 Expected From Facebook On The Back Of Mobile, Video Ad Revenues

Citing a host of factors such as solid user growth/engagement, robust demand for mobile-first, digital video and dynamic ad formats, Cantor Fitzgerald said it expects another strong performance from Facebook Inc (NASDAQ: FB). The firm also sees the company benefiting from an overall enviable position in the digital advertising/media landscape, given the substantial and ongoing secular shift toward mobile and digital video.

Facebook is scheduled to release its fiscal-year, first-quarter results after the market close Wednesday.

Q1 Estimates

Analysts Kip Paulson, Naved Khan and Martha Lepczyk expect Facebook to report first-quarter revenues of $7.867 billion, up 46.2 percent year-over-year, and EBITDA of $4.634 billion. This compares to the consensus estimates, which call for revenues of $7.828 billion and EBITDA of $4.764 billion.

Monthly active users, or MAUs are expected to increase 16.6 percent year-over-year to 1.928 billion and DAU/MAU engagement expected at 0.66, the analysts said. The analysts pitch normalized earnings per share at $0.90 compared to the consensus estimate of $1.12.

Share Gains Likely

Cantor Fitzgerald noted its channel checks indicated continued strength for social ad spend in the first quarter. Specifically, the firm referred to estimates by Merkle and Kenshoo.

Merkle Data

• Ad spend: 71 percent versus 65 percent in Q4, helped by impression and click volume.

Kenshoo's Data

• Social ad spending growth: 41 percent versus 64 percent in Q4, with the deceleration blamed on the disappearance of high-CPM political video ads and lower CPMs sequentially.
• Social video growth: 153 percent year-over-year but down 17 percent sequentially, although representing a 30-percent share of social spend.
• Dynamic ad growth: 202 percent year-over-year.
• Mobile growth: 53 percent year-over-year.
• Instagram ad growth: 41 percent year-over-year.

Mobile And Video: Twin Positives

The firm expects ad revenue growth of 48.2 percent for the first quarter, a slight deceleration from the 53.1 percent growth in the fourth quarter, but three times the rate for the overall online ad market. For mobile ad revenue, the firm models growth of 56.5 percent to $6.674 billion.

"As social media spend continues to take share of integrated ad budgets, as more advertisers gain comfort with the platform (5M+ active advertisers as of early April), and as bid density/pricing moves higher, we see ~30 percent growth as sustainable for the next few years," the firm said.

However, the firm expects a 12.8 percent year-over-year drop in payments and other fee revenues to $157.7 million, as PC gaming declines.

Cantor Fitzgerald maintains its Overweight rating on the shares of Facebook, while it has a $175 price target for the shares.

At the time of writing, Facebook shares were up 1.22 percent at $152.08.

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