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Facebook Earnings Preview: Why Wall Street Is More Confident

Facebook's highly-anticipated fourth quarter earnings are due out after the bell Wednesday. Three big questions: Is Facebook's revenue growth continuing to accelerate? How fast is Facebook growing its mobile business? And what will CEO Mark Zuckerberg and Sheryl Sandberg tell us about the health of Facebook's ads business and other ways it plans to make money.

Facebook shares have rebounded dramatically — up more than 50 percent in the past three months — on a shift in analyst sentiment. Wall Street is getting more confident that Facebook will both make money off its growing mobile user base and figure out new revenue streams, like its "gifts" e-commerce business.

(Read More: Facebook Shares Spike)

The social network is expected to report earnings of 15 cents per share and revenue of $1.527 billion. In the third quarter Facebook's non-GAAP earnings were 12 cents per share on $1.262 billion in revenue. In the third quarter 14 percent of Facebook's ad revenue came from mobile. With the explosion of mobile devices and Facebook's investment in new mobile ad formats, that percentage should be much bigger this quarter.

Stern Agee analyst Arvind Bhatia issued a note Monday predicting that Facebook "will likely post strong fourth-quarter results, including 75 percent mobile revenue growth sequentially." Bhatia said Facebook is well-positioned to benefit from two ad trends: the shift from off-line to on-line advertising, and the increasing importance of a social context for online ads.

The question is whether after the stock's run-up, are expectations are too high? William Blair analyst Ralph Schackhart, wrote: "Facebook needs to post another strong quarter to at least meet expectations." But he rated the stock an "outperform" rating, and noted he's bullish on Facebook Exchange, and Graph Search as new ways the company will make money.

(Read More: The Facebook Obsession)

Electronic Arts, which also reports earnings after the bell Wednesday, is in a bit of a different situation. Analysts have grown increasingly bearish heading into fiscal third quarter results, though its stock is also making gains. EA shares are up more than 20 percent in the past three months, and more than half of Wall Street analysts rate it a "hold."

Wall Street analysts project the company will report earnings of 56 cents per share — down 43 percent from a year earlier, on a 22 percent decline in revenue to $1.295 billion. The big question for Electronic Arts, is how fast it can grow digital revenue, both from stand-alone mobile and social games, as well as from digital add-ons for its console games.

(Read More: Rough December Caps Bad Year For Videogame Sales)

More digital growth is expected, according to Stifel Nicolaus' analyst Drew Crum, who has a "buy" rating on the stock. He wrote in a report Monday that though digital faces tough comparisons, he expected double-digit increases from mobile games in particular, and "digital remains a core piece" of his thesis on the stock.

MKM Partners analyst Eric Handler, who has a "neutral" rating on EA stock noted he has a cautious outlook, but "the bar is already set low."

Looking forward to 2013, he's optimistic about the impact of new consoles from Microsoft Xbox and Sony PlayStation, as well as what he called "a more appealing release slate" in its fiscal 2014.

—By CNBC's Julia Boorstin; Follow her on Twitter: @JBoorstin

  • Working from Los Angeles, Boorstin is CNBC's media and entertainment reporter and editor of CNBC.com's Media Money section.