There is little concern that FB will miss estimates this evening. FB is expected to provide an outlook for its Expense Guidance which is expected to come in well above the 2016 outlook of 40-45%. FB tends to be very conservative on this outlook and has a history of lowering this outlook each quarter. CapEx in the mean time is expected to come in at $4.5 bln in 2016 but FB has said that it would grow 'substantially' in 2017's investment year. These will be key metrics to watch tonight.

Facebook Fourth Quarter Earnings Report (Wednesday, February 1, after the close)

Expectations for Facebook remain quite high. Failure to meet those expectations could cause a material decline in its stock, which is up 14% in 2017, and its peers.  

• FB is trading just below its all-time closing high (133.28), which was set last October in front of its third quarter report
• Ad spending drives Facebook's top line, accounting for 97% of the company's revenue in the third quarter.  
  • Mobile advertising represented approximately 84% of advertising revenue

What Facebook said after its third quarter earnings report in November

• Daily active users (DAUs) were 1.18 billion on average for September 2016 (+17% year-over-year); mobile DAUs were 1.09 billion on average for September 2016 (+22% year-over-year)
• Monthly active users (MAUs) were 1.79 billion as of September 30, 2016 (+22% year-over-year); mobile MAUs were 1.66 billion (+20% year-over-year)
• Continue to expect revenue growth rates to decline in fourth quarter due to tough comparisons
• Continue to expect that total payments and other fees revenue in fourth quarter will be lower than the same period a year ago

Guidance

• Total non-GAAP expense growth in the range of 40-45% year-over-year, down from prior guidance of 45-50%
• Anticipates FY16 capex to be approximately $4.5 billion
• Continues to expect that ad load will play a less significant factor driving revenue growth after mid-2017; expects to see ad revenue growth rates come down meaningfully due to this ad load factor
• Expects 2017 to be an aggressive investment year and that it will grow capital expenditures substantially

Q3 Recap

• Reports Q3 (Sep) earnings of $1.09 per share, $0.12 better than the Capital IQ Consensus of $0.97; revenues rose 55.8% year/year to $7.01 bln vs the $6.92 bln Capital IQ Consensus.

Stocks Affected

• FB
   
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