Mobile in Focus: What to Watch for in Facebook's Earnings

Mark Zuckerberg
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Mark Zuckerberg

When Facebook reports its first-quarter results after the bell today, all eyes will be on its mobile numbers. As more users shift to mobile devices, the big question is how quickly the social network is ramping up its mobile profits.

Wall Street analysts are looking for a bigger percentage of Facebook's revenue to come from mobile—to at least 25 percent from 23 percent last quarter. Of course, the number and percentage of people checking Facebook on their mobile devices daily and monthly will also be key. Investors want to see if the introduction of mobile ads is a turnoff.

With expectations of higher mobile revenue, analysts are looking for total advertising revenue growth better than the 43 percent the company would have seen in the first quarter if not for year-over-year changes in foreign exchange rates.

Analysts are projecting revenue up 36 percent to $1.439 billion, on earnings per share of 13 cents, according to Thompson One Analytics. Facebook has said it expects operating costs to increase by roughly 50 percent this year, so with shares up over 7 percent in the last five trading days alone, expectations have been building.

Doug Anmuth at JPMorgan Chase, who has an overweight rating on Facebook's stock, said he's bullish because he thinks it's early days for social advertising, with less than 10 percent of ad budgets allocated to it. In an earnings preview note, he said that he expects daily active user numbers to increase, spurred by mobile devices.

Anmuth said that the second half of this year could see tough ad comparisons to last year, and he's eager to hear details on the impact of Facebook's Exchange and custom audiences tools.

Sterne Agee's Arvind Bhatia said he's concerned about what he calls the "rough start" for Facebook Home, which he wrote "will probably be great for the avid Facebook users, but it is unlikely to have mass appeal—at least not in its current version."

Bhatia said investors are "heavily focused" on mobile ad numbers and warned that they may be disappointed if mobile generates less than $380 million in revenue. But he's still bullish, rating Facebook a buy, with a $37 target.

BTIG's Rich Greenfield, a persistent Facebook bear who has a sell rating on the stock, noted that Home is falling in the Google Play (Android) store rankings and said it "will not have a notable impact on Facebook users overall time spent/engagement with Facebook." Though Home was launched too recently to affect quarterly numbers, Greenfield has raised questions about Facebook's ads, calling them "spammy."

The stock's movement Wednesday afternoon will depend largely on the company's results compared with expectations. When the earnings call begins at 5 p.m. ET, investors will be listening carefully for CEO Mark Zuckerberg's views on the future of the business, both in terms of mobile and new revenue streams, such as search.

—Follow Julia on Twitter @JBoorstin