Wall Street expects a strong fourth-quarter earnings report from Facebook on Wednesday, amid signs the giant social networking company is feverishly building new products and working to expand its mobile ad business.
Investors and financial analysts say they're hoping Facebook's fourth-quarter results will show the impact of new mobile ad campaigns and other initiatives -- including a program that shows ads to Facebook users based on their visits to other websites, and the online retail service known as Facebook Gifts.
"We see some upside potential," Wells Fargo analyst Jason Maynard wrote in a report this week, citing Facebook's "aggressive" product launches and an increase in the number of ads the company is showing to smartphone and tablet users.
Facebook CEO Mark Zuckerberg will announce the company's earnings just days after two of its biggest online rivals, Google (GOOG) and Yahoo (YHOO), issued strong financial reports of their own. All three companies are scrambling to increase mobile ad sales at a time when consumers
Analysts surveyed by Thomson One Analytics have projected, on average, that Facebook will report earnings of just 3 cents a share on revenue of $1.5 billion, in part because of charges for employee stock options. Excluding those one-time costs, analysts are expecting earnings of 15 cents a share.
Facebook had $1.1 billion in sales for the fourth quarter of 2011, when it was still a privately held company. Although its growth appeared to be slowing last summer, Facebook has said its ad revenue increased at a faster pace in the fall.
In recent weeks, several analysts have predicted Facebook's mobile ad revenue could reach $300 million in the fourth quarter of 2012, or double the $150 million that Facebook reported in the third quarter.
Meanwhile, the company's stock has been climbing out of the hole in which it sank after its initial public offering failed to meet expectations last spring. Facebook shares, which hit a low of $17.55 last fall, closed Tuesday at $30.79.
Just two weeks ago, Zuckerberg showed off a new Facebook search engine at the company's splashiest public event since the May 18 IPO. The launch came after the fourth quarter ended, and the new feature isn't expected to produce revenue right away, but many experts say it's an important strategic move against Google.
Along with results from last quarter, analysts are hoping Zuckerberg will shed more light Wednesday on Facebook's future plans for making money from the Instagram photo-sharing service and from new programs that let users recommend local businesses and send messages to other users for a fee.
"Facebook's biggest problem remains prioritizing and executing against its revenue opportunities," cautioned Ben Schachter of Macquarie Securities in an otherwise bullish report.
Contact Brandon Bailey at 408-920-5022; follow him at Twitter.com/BrandonBailey