Two analysts on Wall Street are betting on Facebook Inc (NASDAQ:FB) ahead of its highly-anticipated earnings release after market close this evening. Though there exists some room for concern, considering the social media giant’s management warning” of “aggressive” expenses in its guidance for 2017, both analysts see FB in a stellar position.
How will the shares move once the print is reported? The expense guidance will be crucial. Yet, regardless, sentiment remains largely bullish on the stock’s prospects.
Susquehanna analyst Shyam Patil underscores both near-term and long-term drivers of growth for the giant. As such, the analyst reiterates a Buy rating on shares of FB with a $160 price target, which represents a just under 21% increase from where the stock is currently trading.
For the fourth quarter, the analyst looks to ad revenue growth, which takes Instagram ad revenue into account, to climb 42% year-over-year. The projection, if met circles a 17 point “decal” from the third quarter as well as a roughly 17% quarter-over-quarter rise. Additionally, the analyst calls for 54% year-over-year growth, a nice surge from 49% year-over-year back in 2015.
“We remain Positive on FB as the company is well positioned to capture significant share of ad budgets over time. We see core NF and video as the key near-to-intermediate-term drivers, and off-network, Messenger, and VR as providing the next legs of growth over the intermediate-to-longer term. Our social ad checks pointed to largely in-line/modestly higher 4Q spending trends, and thus we believe the likelihood of significant outperformance (i.e., a blowout) is less likely. We have also heard of weakness in specific areas, though outside of these pockets, trends were generally solid. Slowing ad load growth in mid-2017 also doesn’t appear to be a growth-inhibiting concern for checks, and we believe the new mid-roll video ads could be an incremental source for budgets. Further, our checks suggest that IG had a strong 4Q and continues to increase as a percentage of the mix, and our checks anticipate solid growth in 2017 […]” Patil concludes.
According to TipRanks, which measures analysts’ and bloggers’ success rate based on how their calls perform, four-star analyst Shyam Patil is ranked #609 out of 4,373 analysts. Patil has a 72% success rate and realizes 9.1% in his yearly returns. When recommending FB, Patil yields 26.8% in average profits on the stock.
Aegis analyst Victor Anthony likewise maintains bright optimism on the giant’s prospects, thanks to excellent user engagement for core Facebook and predominantly encouraging ad checks. Therefore, ahead of the print, the analyst reiterates a Buy rating on FB with a price target of $150, which represents a 13% increase from current levels.
For the fourth quarter, Anthony projects a 45.2% year-over-year rise in revenue to $8,480 million coupled with adjusted EPS of $1.28. Additionally, the analyst highlights that his model implies advertising revenue will climb 47% year-over-year to $8.301 billion, mobile ad growth will experience a 67% year-over-year escalation, and payments as well as other revenues will reach $179.1 million.
Moreover, the analyst anticipates MAUs will grow by 66 million to hit 1.854 billion and DAUs will jump 43 million to 1.222 billion. Thanks to robust MAUs and DAUs for core Facebook, which the analyst determines from his app tracker, as well as a strong assist from Instagram, the analyst predicts upside when the social media giant delivers.
Anthony believes that ad checks have glittered mostly in Facebook’s favor, save for one check,” elaborating, “Our checks were mostly positive with most stating that demand and pricing for both core Facebook and Instagram remained solid post the election. However, one CPG focused agency stated that they were advising clients to allocate brand spend to other channels where they were likely to get a better return. The agency noted, however, that clients just want exposure to Facebook. This was our first cautious commentary on FB in over 8 quarters and one we will continually monitor.”
Ultimately, “If FB posts an upside quarter, like we expect, and issues guidance within that range, the stock could rally further (+14% YTD vs. 2% for the S&P500). If the expense guide is materially higher, the stock is likely to come under pressure, but that should be viewed a buying opportunity given the solid business momentum and under-monetized messaging assets,” Anthony surmises.
As usual, we like to include the analyst’s track record when reporting on new analyst notes to give a perspective on the effect it has on stock performance. According to TipRanks, five-star analyst Victor Anthony is ranked #124 out of 4,373 analysts. Anthony earns 11.9% in his annual returns. When suggesting FB, Anthony gains 48.3% in average profits on the stock.
TipRanks analytics exhibit FB as a Strong Buy. Based on 39 analysts polled by TipRanks in the last 3 months, 36 rate a Buy on FB while 3 maintain a Hold. The 12-month average price target stands at $155.190, marking a 17% increase from where the shares last closed.