When Facebook Inc (NASDAQ:FB) reports its second quarter earnings results next week, it’ll have a much lower bar to jump over than just a couple of months ago.
That’s because Wall Street analysts have been slashing their EPS estimates for the social media behemoth as of late. CNBC has the details on the bearish trend:
Just ahead of its much-anticipated financial report and conference call with CEO Mark Zuckerberg on July 26, the average full-year, 2017 Wall Street earnings estimate on Facebook is $4.85 a share.
In mid-April, before Facebook reported first-quarter results, that consensus number among the 43 analysts who rate the company’s stock was $5.44 per share.
In other words, people who are paid to follow Facebook’s business closely think it will earn about 11 percent lower profit this year than they did at the start of the quarter.
The reasons for the change are largely unknown, but likely have a lot to do with the company spending a lot more money on video. As capital expenditures rise, margins fall, and earnings per share take a hit.
Back in May, Facebook CFO David Wehner gave some insight into the company’s plans. “We continue to expect that full-year 2017 capital expenditures will be in the range of $7 billion to $7.5 billion, which is up over 50 percent compared to last year,” he said. Video has been a frequent target for higher spending by the company in recent years, as it continues to offer advertisers more ways to reach relevant customers.
Growth typically comes at a price. As the old saying goes, you need to spend money to make money, so it appears analysts are reining in expectations mainly in anticipation of higher costs.
We’ll know a lot more about the situation on Wednesday, July 26 after the market close, when FB will report its latest results.
Facebook Inc shares fell $0.31 (-0.19%) in premarket trading Friday. Year-to-date, FB has gained 42.81%, versus a 11.51% rise in the benchmark S&P 500 index during the same period.
FB currently has a StockNews.com POWR Rating of A (Strong Buy), and is ranked #4 of 47 stocks in the Internet category.
Well i believe that the income from these social sites depends heavily on the users and altough almost every person has a facebook, most people that spend most of their time there watch irrelevant stuff, dont care about ads and probably won't generate any income whatsoever....
I don't think everything on facebook is bad, i follow some news pages and technology and they post really interesting stuff, but most of the other stuff is absolute garbage and i can see that the majority of the persons actually care more for the scandal between A and B instead of learning something new or sharing what they know.
I really hope steem will never reach that point (a community that has nothing to teach) unfortunately that's not very easy since money makes people go stupid, and some come here to share others come to take and give nothing back....
But yeah good post!
Competition from other social websites may also be a factor in revenue loss, along with worsening economic times!