The bad news for Facebook does not extend to its earnings — yet

Facebook FB, -0.02% has gone through a meat grinder of a bad news cycle the past few weeks, yet few believe those issues will derail revenue and shares. Consider the past few weeks — a steady diet of dire headlines that included such gems as “The Facebook Files,” “Whistleblower reveals internal Facebook documents,” the announced departure of the company’s longtime chief technology officer, a legal fight with the Federal Trade Commission, and an imminent antitrust bill aimed at the social-networking giant over mergers and acquisitions.

The warning signs intensified Monday, hours before Facebook was to report third-quarter earnings, with a fresh batch of stories that depict a company that overlooked or ignored data on the harms it causes; shrugged off concerns about hate speech and misinformation in pursuit of growth; and regularly put political considerations at the forefront of decision making to avoid charges of bias.

A “Facebook Consortium” of about two dozen media outlets — including the Associated Press, CNN, the New York Times, NPR, the Washington Post, Financial Times, NBC News, CBS News, The Atlantic, Fox Business, and NPR — agreed to hold stories based on leaked materials from Facebook whistleblower Frances Haugen for Monday publication though some broke the embargo over the weekend, according to an Axios report.

“Facebook has not done itself any favors by continuing to run an aggressive ad campaign that proclaims it is open to being subjected to new regulations of an unspecified nature,” Ashley Baker, director of public policy at The Committee for Justice, told MarketWatch. “Given the large number of companies and industries that policy makers want to regulate, and given the nature of some of these proposals, it seems particularly unwise to draw attention to oneself through the use of targeted advertisements.”

For more: Facebook won’t get in trouble for putting profit over people, but that is far from the only issue

But it is the online advertising climate, as well as a recent change by nemesis Apple AAPL, +0.01%, that puts Facebook at “some of the greatest risk” among large internet companies heading into earnings season, warns Evercore ISI analyst Mark Mahaney. E-commerce spending is cooling after surging a year ago, and there are “underappreciated” peril connected to changes made by Apple that give consumers more flexibility to opt out of ad targeting, according to Mahaney.

Apple’s change in privacy policy walloped Snap’s third-quarter revenue and threatens to linger at least through this year, the company warned in an earnings release Thursday. Snap executives also blamed global supply-chain constraints for a shortfall in online advertising, crucial to its financial fortunes. Facebook particularly has been the most vocal critic of Apple’s policy, which seems to be aimed primarily at Facebook.

Read more: Snap stock plummets as it blames Apple for sales miss, Facebook and Google also drop

“Given both the IDFA risks and supply chain, we have to believe FB is going to see at least some exposure to the same headwinds which drove SNAP’s miss and are likely not fully baked into the stock,” RBC Capital Markets analyst Brad Erickson said in a note Sunday. “We do believe FB has likely been more proactive than SNAP with regards to both its over-communicating with ad customers during the quarter as well as actively testing work-arounds to the measurement losses according to our checks.”

Morgan Stanley analyst Brian Nowak, in a note Sunday, also believes Facebook’s “much earlier start and faster pace of innovation to build alternative solutions” makes it more immune to Apple’s changes than Snap.

Then there is the uncertain status of Facebook properties Instagram and WhatsApp, both of which are likely targets of forthcoming merger-and-acquisition legislation from Sen. Tom Cotton, R-Ark., as well as concerns that younger users are hemorrhaging from those services.

Facebook executives are concerned about an exodus of teens from Instagram to services such as Snap Inc. SNAP, -1.43% and TikTok, the New York Times reported Saturday, citing internal documents and unnamed sources. “If we lose the teen foothold in the U.S. we lose the pipeline,” according to an internal memo a year ago.

Then there is the six-hour outage that occurred earlier this month, which could cost the company millions in fourth-quarter revenue, and could be included in the company’s forecast. If the outage’s costs are disclosed, look for it to come from Facebook Chief Financial Officer David Wehner in Monday’s conference call.

Another corporate gambit, a reported change of company name a la Alphabet Inc. GOOGL, -0.28% GOOG, -0.13%, would align Facebook’s brand name more toward the “metaverse” that Chief Executive Mark Zuckerberg envisions, and less on its namesake social network. Instagram, WhatsApp, and Oculus are also under the Facebook umbrella.

What to expect

Earnings: Analysts on average expect Facebook to report earnings of $3.19 a share, up from $2.71 a share a year ago. Contributors to Estimize — a crowdsourcing platform that gathers estimates from Wall Street analysts as well as buy-side analysts, fund managers, company executives, academics and others — are expecting earnings of $3.41 a share on average.

Revenue: Analysts on average expect Facebook to report $29.6 billion in third-quarter revenue, up from $21.47 billion a year ago. Estimize contributors predict $30 billion on average. For the September quarter, the street has projected 2.92 billion monthly active users.

Stock movement: Facebook’s stock is up 25% so far this year, while the S&P 500 index  SPX, +0.46% has increased 21%. However, Facebook’s stock is down 14% from early September,

What analysts are saying

RBC Capital Markets’ Brad Erickson cautions next year’s online advertising market is “something of a going concern” and slackening spending this year could lead to a 22% deceleration in sales for Facebook in the second half of 2021.

Inevitably, it all circles back to Facebook’s increasingly tarnished reputation and a moneymaking machine that seems to defy a growing hostility toward the controversial platform and its executive team.

“There are now three topics to be avoided at the dinner table: Politics, Religion, and Facebook,” AB Bernstein analyst Mark Shmulik said in an Oct. 8 note that rates company shares an outperform with a target of $450. “Once you accept Facebook into that contentious tier, it’s easy to understand why arguments around whether the company is ‘evil’ or ‘being used as a scapegoat’ are grounded in emotion.”