Technology

Why Investors Are Dumping Facebook Ahead of Earnings

When Facebook Inc. (NASDAQ: FB) reports fourth-quarter results after Wednesday’s close, there will be intense focus on how fast the social networking site’s users are growing. That is because of the debate in recent months about whether teenagers and others are moving to other platforms like Instagram.

A British survey suggested teens were going elsewhere, and a widely discussed — and criticized — Princeton study suggested Facebook might lose 80% of its users by 2017. (Facebook did its own study and concluded Princeton might run out of students by 2020.)

The growth numbers will not be as gaudy as before. Zack’s estimates mobile monthly active users will rise 6.2% from the third quarter to 928 million. Monthly active users may increase 3.2% to 1.23 billion, and daily users may reach 755 million, up 3.7%. That is because Facebook has now has such huge audiences in North America and Europe. Another issue is that there is also more competition, as well as only a certain amount of time each day that users can spend on any one service.

The financial position of the company looks strong. Thomson Reuters has the Wall Street consensus being that Facebook will earn $0.27 a share in the fourth quarter, up 58.8% from a year ago. Revenue is expected to be up 47.6% to $2.34 billion.

Facebook’s stock has struggled in January, falling nearly 5%. Shares were off by 3% in late morning trading on Monday, but be sure to keep in mind that this recent 10% pull back from its 52-week high of $59.31 comes after shares effectively doubled in 2013.

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