Facebook Inc Earnings: How Fast Can Mobile Grow?

On Wednesday, Facebook (META -11.40%) will release its quarterly report, and investors have remained impressed with the social media giant's ongoing high-speed growth, especially in the mobile arena. But as Twitter (TWTR) and other social media companies race to stake their claim to Facebook's turf, Facebook's higher aspirations could put it in direct competition with eBay (EBAY 0.16%), Google (GOOG -2.25%), and other large companies that will pose more of a challenge for Mark Zuckerberg's company to overcome.

Facebook has finally paid off for longtime investors, as the stock has put its checkered past behind it following the much-criticized IPO that saw shares lose more than half their value before rebounding fiercely. Now, Facebook is in full-on expansion mode, with acquisitions designed to help it protect its first-mover advantage and fend off Twitter and its peers. But Facebook's growth strategy will inevitably force it into the path of Google and other tech giants. Let's take an early look at what's been happening with Facebook over the past quarter and what we're likely to see in its report.

Source: Facebook.

Stats on Facebook

Source: Yahoo! Finance.

Will Facebook earnings growth accelerate this quarter?
Analysts have been more upbeat in recent months about their views on Facebook earnings, raising first-quarter estimates and full-year 2014 and 2015 projections by 10% to 15%. The stock has climbed about 2% since mid-January but is well below its highs from last month.

Facebook's fourth-quarter earnings results inspired a huge amount of confidence for the company coming into 2014, as the company continued its impressive streak of growth. Earnings per share jumped by 82% on a 63% rise in revenue, both handily topping what investors had expected from Facebook. Clamping down on costs also helped bottom-line growth, and mobile ad revenue topped the 50% mark for the first time, marking another milestone in Facebook's evolution to capture more of the key mobile market. Daily active user counts and engagement levels were also encouraging.

Facebook has continued to dominate the social industry, even after Twitter went public. One particularly strong sign of success has come from the social commerce realm, where recent research showed that 85% of purchases from a wide selection of online stores started from Facebook pages. By contrast, Twitter, Google's YouTube, and other sites like Pinterest made up only a tiny fraction of the overall social commerce market.

But one big question that Facebook has to answer is whether its current acquisition-based growth strategy is sustainable. Last year's purchase of Instagram seemed aligned with its social networking focus, but Facebook has gotten a lot of criticism for spending a whopping $16 billion on smartphone-message service WhatsApp. Following that up with a $2 billion purchase of Oculus and its prospective virtual reality display technology, Facebook wants to capture users who are already naturally inclined to use its service, but many believe that doing so simply to avoid competition could cause Facebook to overextend itself in the long run.

Yet the long-term vision for Facebook relies on deep interactions with users. Mobile payments could provide an avenue for growth, even though it would mean going up against eBay's Paypal and Google's Wallet, along with a host of other players. Yet the marketing community sees Facebook as a combination of a relationship-building tool and a data-collection entity, with the ability to go beyond ordinary advertising in order to help directly bolster brand presence. As long as Facebook keeps gathering useful information and providing access to key decision makers, companies will flock to Facebook in order to engage those would-be customers directly.

In the Facebook earnings report, watch closely for hints about Zuckerberg's integrating principle behind his most recent moves. If Facebook can synthesize all of its acquisitions and other initiatives into a cohesive, self-supporting whole, then the stock could have plenty more growth in its future.

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