Facebook (NASDAQ:FB) seems to always be coming under fire, ever since data privacy concerns started bubbling to the surface early last year. Last week wasn't any different, with co-founder and CEO Mark Zuckerberg getting grilled at a hearing on Capitol Hill. The odd footnote is that Facebook stock itself is also coming under fire, but in a good way. The shares are hot in 2019, up 43% so far this year.

Facebook has been climbing a social wall of worry this year, even as critics of the social networking giant grow louder and the #deleteFacebook movement gains traction. The parent company behind Instagram, WhatsApp, Oculus VR, and its namesake social networking juggernaut is finding ways to grow its audience and -- perhaps more importantly -- its ability to cash in on the masses.

Facebook is doing just fine now, but let's see how the year ahead will play out for both the controversial dot-com and its investors. 

An employee at Facebook's office in Germany.

Image source: Facebook.

Engagement party

Facebook doesn't report its third-quarter results until Wednesday afternoon, but momentum is on its side. There were 1.59 billion daily active users and a whopping 2.41 billion monthly active users at the end of June, an 8% advance on both fronts over the past year. 

Growth is slowing, but at least the meter is moving in the right direction. For every person who lives up to the #deleteFacebook threat, there seems to be at least one other person signing up or coming back. There's little reason for Facebook's pace to accelerate in the year ahead, but that doesn't mean we're heading into an age of single-digit revenue growth. The key to Facebook's success in the coming year -- just as it's been in its Wall Street revival in 2019 -- is how well it monetizes its traffic.  Facebook has turned that 8% increase in active users into a 28% surge in revenue, as improving engagement and ad revenue per user make this a more viable business with every passing quarter. 

This is a scalable business, but profitability hasn't come along for the ride. Facebook is investing heavily in ramping up its monetization opportunities as well as putting out reputation-smacking fires, and that has translated into back-to-back quarters of sharp declines on the bottom line. Analysts are hopeful that Facebook will get back on track in the coming year. 

Wall Street sees revenue rising nearly 22% to hit $85.5 billion next year. Earnings per share are expected to soar 51% to $9.50 a share, but that's coming off depressed 2019 bottom-line results. Frame next year's targets to last year's results, and the tables turn, with revenue and earnings per share rising 53% and 25%, respectively, since 2018.

The good news is that if Facebook can live up to analyst estimates for the year ahead, it will mean the platform keeps expanding its popularity and that margins have started to move in the right direction again. Problem solved? Not exactly. Wall Street isn't always right, and analysts have fallen woefully short of Facebook's earnings estimates in back-to-back reports. 

The market has rewarded Facebook for its top-line gains without penalizing it for its shortfalls on the bottom line -- a compromise that growth stock investors are willing to make in the near term -- but patience never lasts forever. Facebook will be a victim to headline risks, a narrative that will only get louder as we head into next year's presidential election. A lot of things will have to go right for Facebook to win again in 2020, and that's assuming we don't get to the point where the defectors start to outpace the folks signing up. All bets are also off if advertisers turn their back on the platform. The risks are high, and the rewards are unlikely to match 2019's monster run even in ideal conditions.

We may not be at peak Facebook, but it will be difficult for Facebook to beat the market in the year ahead unless a lot of things line up just right.