Earnings never cease to draw up excitement among analysts as ratings flood in today following yesterday’s earnings from Facebook Inc (NASDAQ:FB) and eBay Inc (NASDAQ:EBAY). Facebook impressed yet again with its unrelenting growth and strong earnings. On the flip side, analysts remain cautious on eBay, warning that the company will take more time to return to its former glory.
After Facebook’s strong earnings, top analyst Mark Mahaney of RBC Capital weighed in on the social media giant with bullish views. The stock is currently up more than 13 percent. Mahaney has a 55% success rate recommending stocks with a +17.3% average return per rating.
Facebook posted revenue of $5.84 billion, marking a 60% year-over-year increase excluding FX headwinds, and beating the Street consensus of $5.37 billion. Mahaney points out that Monthly Active Users were up 14% y/y to 1.59 billion, half of which were Mobile-only. Furthermore, the analyst found other promising user trends, explaining, “DAU/MAU ratio (engagement measure) tied a record 65.2% with all regions but Asia improving.” Advertising revenue was impressive too, increasing 66% y/y (excluding FX headwinds).
Facebook’s operating expenses guidance of 45% to 55% is in-line with expectations, and Mahaney underlines that it is a “GOOD THING when growth companies grow their opex.” The analyst increased his 2016 estimates to reflect these positive earnings, now estimating revenue of $36.7 billion and EPS of $3.38.
Mahaney concludes, “Facebook continues to generate very high & very profitable growth. An extremely rare combination, in our view. And we see in FB plenty of strong, secular platform growth ahead.” The analyst reiterates an Outperform rating on the stock and increases his price target from $130 to $160.
According to TipRanks, 35 analysts are currently bullish on Facebook, 1 is bearish, and 2 remain neutral. The average 12-month price target between these 38 analysts is $127.76, marking a 19% potential upside from current levels.
Brian Pitz of Jefferies lowered his price target on eBay from $28 to $25. The stock is down more than 12% after earnings to $23. Pitz rated the stock a Hold this morning after the company released earnings last night.
Here is why the analyst remains cautious on eBay:
- “While [management] saw small signs of softening in late Dec, overall eCommerce trends in the [quarter] were healthy with very strong performance during Cyber week”
The company reported net revenue of $2.32 billion, in-line with the analyst consensus, though relatively flat year-over-year. Non-GAAP EPS came in at $0.50, meeting Street’s expectations despite a 1% year-over-year decline in transaction values.
- “[Business] continues to stabilize but guidance came in soft.”
The analyst found management’s guidance disappointing as eBay estimates first quarter net revenue between $2.05 billion and $2.10 billion, and non-GAAP earnings between $0.43 and $0.45. For full-year 2016, management guided net revenue between $8.5 billion and $8.8 billion with non-GAAP earnings between $1.82 and $1.87.
- “Despite progress in key strategic initiatives (e.g. transition to structured data), more time is needed before any expected benefits materialize in operating results.”
Overall, Pitz believes that eBay may be on its way to reclaiming its former glory, but the company isn’t there quite yet. Pitz is a top analyst in the Internet and interactive entertainment sector. Pitz’s stock picks average a 12.2% one-year return with a 61 percent success rate. He is ranked in the top 3 percent of all Wall Street analysts according to TipRanks.
The top analyst bases his $25 price target on 10% discounted cash flow and highlights potential risks such as macro-economic headwinds, FX exposure, and evolving e-commerce regulation in the form on online sales tax.
Brian Pitz has a 61% success rate recommending stocks with a +12.2% average return per rating. According to TipRanks, a website that measures the performance of past analyst ratings, 6 analysts are currently bullish on eBay and 9 remain neutral. The average 12-month price target between these 15 analysts is $29.46, marking a 26% potential upside from current levels.