Key Takeaways

  • Analysts estimate EPS of $2.32 vs. $1.71 in Q1 FY 2020.
  • Monthly active users are expected to rise YOY.
  • Revenue growth is expected to accelerate YOY amid ongoing shift to online commerce.

Facebook Inc. (FB) has posted healthy revenue and earnings gains over the past year amid surging online traffic due to lockdowns and other shelter-in-place measures related to the COVID-19 pandemic. Perhaps most significant, growth in the social media company's giant global user base reaccelerated after years of slowing. But the company continues to face ongoing challenges, including antitrust lawsuits and a recent spat with Apple Inc. (AAPL) over a coming privacy update to the iPhone maker's iOS14 operating system. Apple's move threatens to adversely impact Facebook's ability to profit from targeted ads.

Despite this complex array of challenges, investors are likely to focus mainly on whether Facebook can maintain robust earnings and revenue growth when it reports earnings on April 28, 2021 for Q1 FY 2021. Analysts expect growth in earnings per share (EPS) to decelerate while revenue rises at a pace similar to the final quarter of FY 2020.

Investors will also be focusing on Facebook's monthly active users, a key metric that provides an indication of the size of the company's user base. Analysts expect monthly active users to rise compared to the year-ago quarter, albeit more slowly than in each of the past four quarters.

Shares of Facebook have outperformed the broader market over the past year. The stock reached a new all-time high earlier this month but has retreated over the past several weeks. Facebook shares have provided a total return of 61.6% over the past year, above the S&P 500's total return of 45.5%.

One Year Total Return for S&P 500 and Facebook
Source: TradingView.

Facebook Earnings History

The stock, which had begun to fall shortly after making a recent surge, continued to slide after Facebook released financial results for Q4 FY 2020 in late January. But the decline was short lived. EPS for the quarter rose a robust 51.7% as revenue climbed 33.2%. It marked the fastest pace of revenue growth since Q2 FY 2018. Facebook said that it was benefitting from the ongoing shift towards online commerce, a trend that has been accelerated by the pandemic.

In Q3 FY 2020, EPS grew 28.1% compared to the same-three month period a year ago, marking the slowest pace of growth since the final quarter of FY 2019. Meanwhile, revenue expanded at its fastest pace since then, rising 21.6% compared to the year-ago quarter. Facebook said that its strong results for the quarter were supported by people and businesses continuing to rely on its services in order to stay connected during the pandemic.

Analysts expect Facebook to post robust growth in Q1 FY 2021, albeit somewhat slower than in the final quarter of FY 2020. EPS is expected to rise 35.6% as revenue grows 32.9% compared to the year-ago quarter. For full-year FY 2021, analysts are currently forecasting annual EPS to rise 10.5%, a significant deceleration from last year's increase of 57.1%. Revenue for the year is expected to rise 25.3%, which would be the fastest pace since FY 2019.

Facebook Key Stats
  Estimate for Q1 2021 (FY) Q1 2020 (FY) Q1 2019 (FY)
Earnings Per Share ($) 2.32  1.71 0.85
Revenue ($B) 23.6 17.7 15.1
Monthly Active Users (B) 2.8 2.6 2.4

Source: Visible Alpha

The Key Metric

As mentioned above, investors will also be focused on Facebook's monthly active users (MAUs), a key metric providing a measure of the size of the company's global active user base. Facebook defines a MAU as a registered and logged-in user who visited Facebook through its website or a mobile device, or used its Messenger app sometime during the 30 days of the measurement period. Facebook derives the majority of its revenue through selling advertising space on its social media sites and apps to marketers. The bigger its user base, the more attractive its platform is to advertisers. Facebook's share of total digital ad spending in the U.S. in 2020 was 25.2%, second only to Alphabet Inc.'s (GOOGL) Google.

Facebook's user base is massive. At nearly 2.8 billion MAUs at the end of FY 2020, its user base is equivalent to more than a third of the world's total population. If growth is decelerating, which it has been, it's not difficult to see why. In FY 2016, Facebook's MAUs rose 16.8% to finish the year with just under 1.9 billion. Growth decelerated every year until reaching a pace of 7.6% in FY 2019. Last year, as millions of people were stuck at home amid the pandemic and Internet traffic surged, annual growth in MAUs accelerated to a pace of 12.0%. However, analysts are expecting growth to begin slowing again in FY 2021. They forecast that MAUs will rise 8.9% year over year (YOY) in Q1 FY 2021, which would be the slowest pace since the final quarter of FY 2019. For full-year FY 2021, growth in MAUs is expected to slow to a pace of 5.6%, which would be the slowest in at least six years. But that would bring Facebook's total MAUs to just under 3.0 billion by the end of the year.