Needham Weighs in on Facebook Inc (FB) and Yahoo! Inc. (YHOO) Before Earnings


Facebook Inc (NASDAQ:FB) and Yahoo! Inc. (NASDAQ:YHOO) are both scheduled to release second quarter earnings results later this month. In light of this, Laura Martin of Needham weighed in both stocks ahead of earnings. Martin is a top-ranked analyst with a 70% success rate recommending stocks and a +27.1% average return per recommendation.

Laura Martin

On July 8, Laura Martin reiterated a Buy rating on Facebook with a $93 price target. With Facebook preparing to release second quarter earnings on July 29, the analyst maintains her $4 billion revenue estimate, marking a potential 38% year-over-year increase, and non-GAAP earnings per share estimate of $0.39, marking a potential 6% year-over-year decrease. In Facebook’s last conference call discussing first quarter earnings, the company warned that the strengthening of the US Dollar reduced its first quarter total revenue growth rate by 7%, and forewarned that “foreign exchange headwinds in Q2 will likely be greater than those we experienced in Q1.”

Martin notes Facebook’s 1.44 billon person “global reach,” and the company’s “optionality upside provided by their 4 key properties, each of which has premium shelf-space status on the first two screens of most SmartPhones, and 3 of which have no meaningful monetization today.”

Furthermore, Martin recently weighed in on Facebook’s new payment scheme for advertisers. Now, advertisers who buy advertising space on a cost per click scheme will only be charged when a user clicks the link, as opposed to paying when a user engages with the link by “Liking,” commenting, or sharing it. Martin explained that this new payment scheme is an improvement for Facebook and will allow marketers to have a clearer read on their Facebook advertisements.

Laura Martin has rated Facebook 17 times since May 2012, earning a 76% success rate recommending the stock and +37.3% average return per FB rating when measured over a one-year horizon and no benchmark. Out of the 34 analysts who have rated Facebook in the past 3 months, 30 are bullish, 3 are neutral, and 1 is bearish. The 12-month average price target for the stock is $97.29, marking a 14% potential upside from where the stock is currently trading.

Also on July 8, Laura Martin reiterated a Buy rating on Yahoo with a $55 price target. Yahoo will announce second quarter earnings on July 21. Martin estimates Yahoo will post net revenue of $1.029 billion, marking a 1% year-over-year decrease. In Yahoo’s first quarter earnings conference call, the company announced second quarter revenue guidance between $1.21 billion and $1.25 billion. Martin also estimated non-GAAP earnings per share of $0.19, marking a 48% year-over-year decrease.

The analyst maintains her bullish rating on the stock due to “an inexpensive valuation (i.e., negative 5% EBITDA growth for 10 years embedded in today’s share price), and the catalyst upside of the announced Alibaba split.” In late June, Yahoo CEO Marissa Mayer sent a letter to shareholders explaining that the Alibaba spinoff should be completed by the fourth quarter of 2015 and will “[maximize] value and tax-efficiency exclusively for Yahoo’s shareholders.”

Laura Martin has rated Yahoo 16 times since December 2011, earning a 62% success rate recommending the company and +27.3% average return per YHOO rating when measured over a one-year horizon and no benchmark. Out of the 23 analysts who have rated Yahoo in the past 3 months, 17 are bullish and 6 are neutral. The 12-month average price target for the stock is $55.49, marking a 49% potential upside from where the stock is currently trading.