Social media giant Facebook Inc (NASDAQ:FB) is slated to announce second quarter 2015 earnings on Wednesday, July 29 after market close. The street expects the company to post earnings of $0.47 a share and $3.98 billion in revenue, up from $0.42 earnings per share and $2.91 billion in revenue the same quarter a year prior.
Investors and analysts alike will be looking for updates on Facebook’s mobile and video advertising platform, which is expected to be a key driver in the company’s earnings results.
Facebook has been making strides in developing and improving various areas of its mobile advertising platform, including measurement and targeting revisions, auto-play video ads, FAN, Atlas, LiveRail, and the recently expanded Buy Button. As such, investors’ perceptions of Facebook are changing from just a social media website to a global communications platform.
A handful of Wall Street analysts have weighed in on Facebook in light of the company’s upcoming Q2 earnings.
On July 21, Jason Helfstein of Oppenheimer reiterated a Buy rating on Facebook with a $100 price target. The analyst foresees a strong second-quarter for Facebook, driven by higher mobile engagement, strong monetization, and the continued rollout of video ads.
Helfstein notes that the checks suggest better 2QFY15 sequential trends compared to last year, driven by improved targeting, native content, and multiple ad formats. He continues, “2Q exchange rates suggest a 9% negative impact to revenue, consistent with our prior model.” Furthermore, “Deeper ad-tech stack, Facebook Audience Network (FAN) and video could provide upside to estimates.” Helfstein concludes, “new click definition for CPC’s, video ads priced after 10 seconds, and rollout of Instagram platform to all advertisers could be meaningful drivers for 2H:15.”
When measured over a one-year horizon and no benchmark, Jason Helfstein has an overall success rate of 53% recommending stocks, earning a +11.7% average return per recommendation. The analyst has rated Facebook a total of 23 times since June 2012, earning an 87% success rate recommending the stock and a +44% average return per Facebook recommendation.
On July 21, Merrill Lynch analyst Justin post Reiterated a Buy rating while raising his price target to $100 from $90 “on incremental confidence.” The analyst also added shares of Facebook to the “US 1 high-conviction list” which represents a “collection of Bank of America Merrill Lynch’s top investment ideas.”
Post believes Facebook’s valuation looks good when compared to its peers, and is a top idea in the internet market given its mobile exposure and growing time share in the space. The analyst adds that the social media network is also set to gain from video transaction, improved targeted ads, Instagram and a host of new platforms.
Post wrote, “We see Facebook as the best positioned Internet media company to capitalize on media sector trends as we expect the company to take disproportionate share of ad industry spend as Facebook remains a top beneficiary of mobile Internet adoption.”
The analyst concludes, “Heading into earnings, we expect near-term growth to be driven by further improvements in News Feed targeting and relevancy, driving higher click through rates (CTR) and conversion, and ultimately yielding higher prices.”
When measured over a one-year horizon and no benchmark, Justin Post has an overall success rate of 66% recommending stocks, earning a +18.5% average return per recommendation. The analyst has rated Facebook a total of 14 times since June 2012, earning a 92% success rate recommending the stock and a +46.4% average return per Facebook recommendation.
Out of 35 analysts polled by TipRanks, 31 analysts are bullish on Facebook, 3 are neutral, and 1 is bearish. The average 12-month price target for Facebook is $99.09, marking a 0.71% potential upside from where stock is currently trading. On average, the all-analyst consensus for Facebook is a Moderate Buy.