Facebook investors, shrugging off election woes, look for payday

Facebook Inc may face questions about fallout from U.S. election controversies when it posts earnings on Wednesday, but top of mind for investors is a less political matter: the company's heavy bet on e-commerce to drive ad sales.

The world's biggest social media company is poised to reap a windfall from that gambit, analysts say, bolstered by a return in ad growth rates to pre-COVID levels and a holiday shopping boost from its new "social commerce" features.

Wall Street expects the company to report fourth-quarter sales up 25% to $26.4 billion, according to IBES data from Refinitiv.

Driving those gains were a coronavirus-era shift away from physical stores and the unequal impact of the pandemic on low-income populations, which left others with "flush household balance sheets," Evercore ISI analysts wrote in a note.

Investors will be watching for signs of how new shopping features performed, including tools like Facebook Pay that enable in-app purchases in units Instagram and WhatsApp as well as on the company's namesake app.

"This e-commerce investment seems to have started to pay off right as offline businesses are looking for more online activity," BofA Global Research analysts wrote.

Investors will also look for guidance on the company's plans to integrate messaging across its suite of apps and introduce shopping into Reels, a short-video product inside Instagram intended to compete with TikTok, they said.

Still, Facebook is likely to face questions around U.S. antitrust complaints, privacy changes in Apple Inc's latest iOS update and Facebook's role in recent Capitol protests, as well as the business impact of its decision to suspend former U.S. President Donald Trump.

Facebook will be the first of the ad-supported tech companies to post its earnings this season. Alphabet's Google, Twitter, Snap and Pinterest are set to follow in the coming weeks.