Will International User Growth Aid Facebook (FB) Q3 Earnings?

Zacks Equity Research
·4-min read

Facebook FB is set to report third-quarter 2020 results on Oct 29.

The company’s growing popularity in international markets, particularly Asia, is expected to have expanded its user base in the to-be-reported quarter.

The Zacks Consensus Estimate for Monthly Active Users (MAU) in Asia stands at 1.142 billion, indicating 12.7% growth from the year-ago quarter’s reported figure.

The consensus mark for Europe is pegged at 408 million, suggesting 5.4% growth from the year-ago quarter’s reported figure.

Additionally, the consensus mark for Rest of World MAU is pegged at 895 million, indicating 11.6% growth from the year-ago quarter’s reported figure.

Facebook, Inc. Revenue (TTM)

 

Facebook, Inc. Revenue (TTM)
Facebook, Inc. Revenue (TTM)

Facebook, Inc. revenue-ttm | Facebook, Inc. Quote

Further, strength in user base is expected to reflect on advertising-revenue growth despite the negative impact of the coronavirus pandemic on ad spending and ad-targeting-related headwinds. Notably, changes made by Apple AAPL and Alphabet’s GOOGL Google in their mobile operating systems and browser platforms limited Facebook’s ability to track the user-activity trend.

Moreover, ad sales for the to-be-reported quarter are expected to take a hit from advertiser exodus despite an improving ad-spending environment. Notably, a number of companies, including Starbucks, Coca Cola and Verizon, among others, have announced plans to freeze ad spending on Facebook due to its failure to eradicate hate speech and misinformation.

The consensus mark for this Zacks Rank #3 (Hold) company’s third-quarter advertising revenues is pegged at $19.43 billion, indicating 11.7% growth from the figure reported in the year-ago quarter. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Click here to know how the company’s overall third-quarter performance is likely to be.

Key Q3 Developments

Facebook Makes Portal Remote-Work Friendly

Facebook added BlueJeans, GoToMeeting, Webex and Zoom Video ZM to Portal in the third quarter, making the device more remote-work friendly for users confined at home due to the coronavirus-led disruptions.

Markedly, the introduction of Workplace on Portal has driven frictionless communication among users working remotely. Facebook also introduced Workplace Login and has been focusing on improving security and privacy of the device.

In fact, Facebook’s initiatives toward data protection and privacy issues are expected to attract old and new users and help it compete with rivals like Apple’s iMessage.

Notably, Apple’s iMessage, the leading messaging app in the United States, is already an end-to-end encrypted service. Moreover, multiple messaging apps such as Telegram (with more than 200 million monthly active users), Signal and Wire, among others, have been able to increase the size of their user base by promising full end-to-end encryption and greater user privacy on their platforms.

Efforts to Unify Family of Apps Continue

Markedly, Facebook’s efforts to integrate Whatsapp, Instagram and Messenger are likely to help it create a privacy-focused communications platform. The company is focused on initiatives like private group chats and person-to-person communications instead of the newsfeed style of public broadcast Facebook is known for.

During the to-be-reported quarter, Facebook reportedly began integrating Instagram and Messenger chats. The social-media giant also confirmed integrating Messenger Rooms shortcut on both Instagram and WhatsApp. Users can now access Messenger Rooms, which allow group video calls of up to 50 people with no time limit, via WhatsApp on the desktop.

Notably, a common Facebook account linkage across service apps will provide Facebook with consolidated user information from all platforms. Undoubtedly, the company’s user base of more than 3.14 billion (including its Family of services — Instagram, WhatsApp and Messenger) presents a large canvas for advertisers and makes the platform still highly attractive.

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