Tomorrow marks the first time that Facebook will file a quarterly earnings and revenue report as a public company. For any firm, it’s a milestone. For Facebook, which debuted at a roughly 12 figure valuation, it’s an event that will be watched by the entire investing community, regardless of whether they own stock in the company.
A strong Facebook quarter could boost the valuations of a whole host of technology firms. A weak report could degrade investor confidence in all tech firms.
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For companies such as Microsoft, Apple, and Google that sport sub-20 PE ratios, the damage would likely be light. However, for companies such as LinkedIn, Groupon, and others, the impact could be heavier; if Facebook, which has scale that is all but unmatched, can’t monetize, what chance might others have? It’s a silly question, given the business model diversity among recently debuted tech firms, but markets are not always perfectly insightful.
That Zynga’s earnings flop took Facebook down over 7% (as of the time of writing) in after hours trading is an illustration of this effect. However, as Facebook is a much larger company, its impact will be larger, plus or minus.
It is a possibility that Facebook has a dull quarter from the perspective of earnings surprises, but no matter what it reports, its words will ripple. If Facebook’s ad platform is seeing softening rates, lower ad spending, reduced growth, mobile issues, or anything else, other firms will be swept along.
Facebook is expected to report earnings per share of $0.12 on revenues of $1.1 billion for the quarter.
Tomorrow could solidify Facebook as a solid public company, and one that shouldn’t be viewed through only the prism of it being a technology operation, or it could shut the door for any coming technology IPO by poisoning investor confidence in technology operations. TNW will be covering its earnings live.
Top Image Credit: Emmanuel Huybrechts