A Need to Know Basis: Facebook, Amazon Earnings - Wall Street Journal

Facebook and Amazon report earnings after the bell. Here are the important numbers and angles you need to keep in mind. All numbers courtesy of Thomson Reuters.

Facebook:

Earnings: Street consensus is for earnings of 12 cents a share on revenue of $1.1 billion.

Keep in Mind: The hype surrounding Facebook’s first quarterly report as a public company was already at fever pitch. But Zynga’s faceplant late Wednesday has further magnified the spotlight on the social-networking company.

Pressure is sky high on Facebook, the most heavily traded IPO of all time, to dispel investor concerns about slowing growth. Analyst estimates are all over the map: The 31 analysts that cover Facebook project EPS anywhere from 9 cents to 29 cents.

Shares have nosedived since the $38 IPO in May amid questions about whether the company’s $100 billion valuation was justified. The stock is down another 6% this afternoon as concerns swirl about how Zynga’s results will impact Facebook’s bottom line.

Investors are worried Facebook may not be able to avoid Zynga’s troubles, especially since Facebook relies on the social-gaming company for a chunk of its revenue.

Evercore analyst Ken Sena estimated that Zynga’s shortfall could hurt the company’s payments to Facebook by about 10%, or less than $20 million. He cut his second-quarter revenue estimate by 2% to $1.1 billion, although he views this as more of a longer-term detriment to Facebook.

Some key issues analysts and investors will focus on in this afternoon’s report and conference call include Facebook’s mobile strategy, its user growth rate and whether or not the company will provide an outlook.

Amazon:

Earnings: Street consensus is for EPS of 3 cents, 2 cents on an adjusted basis, on revenue of $12.89 billion. A year ago, the company earned 41 cents a share on revenue of $9.91 billion.

Keep in Mind: Amazon is an interesting bird. The online retailer kills it on price, and it’s investing a lot of money in its operations, but that produces razor thin margins. Still, the stock enjoys an astounding 187 PE ratio. People just buy this story.

So when Amazon reports the meager profit that’s expected, it won’t shock anybody. If the revenue line comes in short, however, that might be a red flag, a sign that the weak global economy is hurting more than helping.

A big chunk of that investment budget is going into the Kindle eReader. Investors are buying into the invest -now, profit-later plan, but given the fierce competition in this arena, pay attention to any numbers/comments on eReaders from management.

Still, the big questions around this company are all about the future, and the big, structural changes taking place in the retail marketplace.

“We suspect the secular shift from offline to online may be getting morepronounced as the economic slowdown appears to be having a greater impact on traditional retailers,” Benchmark analyst Daniel Kurnos wrote. Despite tough year-ago comparisons, and the weak economy, Kurnos thinks Amazon will post a 30% jump in revenue, to $12.92 billion, with EPS at 5 cents.

Also keep an eye out for any comments about sales tax, which Amazon will soon start collecting. The move is being spun as a positive, but if it eats into Amazon’s price advantage, sales could suffer.