Analysts and investors are tuning in this week for earnings from social media giants Facebook Inc (NASDAQ:FB), Twitter Inc (NYSE:TWTR), and LinkedIn Corp (NYSE:LNKD). Analysts will pay close attention to user growth metrics for each site, as well as new monetization efforts that will drive each company in the long run.
Social media giant Facebook will post first quarter earnings on Wednesday, April 27 after market close. Analysts expect the company to post earnings per share of $0.62 and revenue of $5.25 billion, both figures marking a 48% year-over-year increase.
All eyes will be on advertising revenue, specifically from Instagram. Since Facebook purchased the photo-sharing platform for $1 billion in 2012, it has been treading lightly in terms of advertising in order to avoid alienating its users. Now with advertising efforts fully rolled out on the platform, analysts will be looking for price spent per ad, and overall revenue derived from the platform.
Going forward, analysts will be listening for Facebook’s plans to monetize WhatsApp and its virtual reality platform. Facebook paid over $20 billion for WhatsApp in October 2014. Together, WhatsApp and Facebook Messenger process 60 billion messages every day; three times more than that of SMS communication.
User growth will also be a point of interest in the company’s report. While Facebook continues to post impressive growth metrics, analysts worry that this figure is bound to decelerate. In the previous quarter, Facebook posted 14% year-over-year increase in monthly active users (MAUs) and a 21% y/y increase in mobile MAUs.
According to analysts polled by TipRanks in the last 3 months, 93% are bullish on Facebook while 7% remain neutral. The average 12-month price target for the stock is $137.57, marking a 24% potential upside.
Twitter will announce first quarter earnings on Tuesday, April 26 after market close. Analysts are expecting the social media company to post revenue of $608 million, up nearly 40% y/y, but marking an alarming deceleration considering the company posted a 48% y/y increase in the quarter prior. Analysts also expect non-GAAP EPS of $0.10, marking a 43% y/y increase.
Analysts and investors have been continuously concerned with user growth deceleration. This is troublesome to investors who can’t help but compare the company to Facebook, which has been able to grow its user base. Twitter is investing in changing the platform to attract new users and retain old users. In tandem with attracting new users, the company must work on retaining old users by combatting slowing engagement. The company has targeted this with its video-streaming app, Periscope, though investors are waiting for meaningful plans on monetizing this service.
Colin Sebastian of Baird weighed in on the company on April 20, 2016, reiterating a Neutral rating on the company with an $18 price target. For the upcoming earnings report, the analyst believes there is “potential for slightly improving [monthly average user, or MAU] trends,” but notes that this may be due to ephemeral attention from election-style tweets and the company’s deal to stream 10 Thursday night NFL games.
According to analysts polled by TipRanks, 45% are bullish on the company, 48% neutral and 6% are bearish. The average 12-month price target is $25.17, marking a 46% potential upside.
LinkedIn will report its Q1:2016 earnings on April 28 after market close. For this quarter, analysts are expecting revenues of $829.53 million and earnings of $0.60 per share, compared to revenues of $637.69 million and earnings of $0.57 for the same quarter of last year.
For this report, investors will be watching for unique visiting members, as an expanding user base indicates growth. In Q4, this metric remained flat at 100 million, therefore investors will be paying specific attention to any increases in this number. Investors are also looking for updates in the company’s Chinese market. Last quarter, the company indicated China was its “fastest growing market in terms of new users.” The company indicated it would heavily invest in this market in 2016 to tap into a 140 million user opportunity.
Investors will be closely watching for any updates to 2016 guidance. Last quarter, the stock dropped 40% after the company reported Q4 earnings due to weak guidance resulting from currency headwinds and the shutdown of B2B ad platform, Lead Accelerator, losing $50 million in revenue.
Although the company shutdown Lead Accelerator, investors are hoping for updates on the Lynda.com acquisition under revenue labeled “learning and development,” categorized under its talent solutions segment. Last quarter, it contributed $49 million to earnings, representing 6% of total revenue. Investors will be looking for a larger percentage this time around. Similarly, investors will be watching for the performance of LinkedIn’s Sponsored Updates, which currently makes up over 50% of the company’s marketing and solutions revenue.
Morgan Stanley analyst Brian Nowak expressed his views on the company on March 16, 2016, downgrading the stock from Overweight to Equal Weight and decreasing his price target to $125 (from $190). The analyst highlighted concern regarding slowing growth and increased investments. He stated, “We have previously been bullish on LNKD’s platform monetization opportunity driven by: 1) multiple years of assumed strong Talent Solutions (TS) growth as more large enterprises and SMBs adopt the platform and 2) budding new monetization opportunities like B2B advertising, Lynda, and Sales Navigator. But 4Q:15 results, 2016 guidance, decelerating large enterprise customer growth, and recent management commentary on strategic investments make us believe we have overestimated LNKD’s ability to grow its platform and underestimated the investment needed to grow.”
According to TipRanks, out of all the analysts who have rated the company in the past 3 months, 53% gave a Buy rating while 47% remain on the sidelines. The average 12-month price target for the stock is $169.75, marking a 42% upside from where shares last closed.