Here's How Facebook Shares Break Out After Earnings

In a report published Tuesday, Axiom Capital analyst Victor Anthony maintained a Buy rating on Facebook Inc FB, while reducing the price target from $105 to $103, ahead of the 1Q15 results.

Facebook is scheduled to report its quarterly results on April 22. Despite adverse currency impacts, the company's results may beat the estimates.

In the report Axiom Capital noted, "Checks throughout the quarter have been positive with both direct response and brand advertisers increasingly viewing Facebook as a must-buy platform. The business is in a fundamentally strong position to continue to take share of ad budgets."

Although FX risk may continue to exert pressure on the company's results in 2015, "incremental contributions from video, newsfeed monetization, and contributions from other platforms like Instagram, could help the shares break out of the current range," Anthony said.

The analyst expects the company to report revenues of $3.548B, representing 42 percent y/y growth, adjusted EBITDA of $2.18B, representing 30 growth and 61.5 percent margins, and non-GAAP EPS of $0.40.

Checks indicate:

• Video - This content type on Facebook is going “through the roof” in terms of the engagement on the platform. Several advertisers who have tested video ads are "jumping into video wholeheartedly" since they are witnessing robust results
• Competition With Search - Advertisers are expanding their budgets, seeing the value of Facebook.
• Brands – Large-brand advertisers are increasingly embracing Facebook.
• Mobile App Installs - Advertisers in the mobile gaming space, e-commerce companies, travel and branded entertainment apps have all indicated that Facebook is "the most effective channel and that’s where the largest portion of their mobile spend is going."
• Pricing – Pricing stabilized in 1Q after having surged in the previous quarter, driven by competition for inventory. However, with an increasing number of advertisers opting for mobile ads on Facebook, prices have begun rising again.
• Advertisers Putting Pressure on FB About Rising CPMs - Traditional ad agencies assign great value to reaching the maximum number of people at the lowest costs. Such agencies are "complaining to Facebook that CPMs on the platform are too high."

Anthony listed the 8 pillars of growth, which are likely to be the focus points of Facebook's call commentary:

1. Newsfeed monetization and ad units
2. Performance of auto-play video ads
3. WhatsApp user growth
4. Messenger growth and future monetization
5. Ad Tech
6. Oculus
7. FAN
8. Internet.org