2 Main Expectations Ahead of Facebook Inc (FB) Earnings


Facebook Inc (NASDAQ:FB) is scheduled to report fourth-quarter earnings next Wednesday, February 1, and for this special occasion, Wedbush analyst Michael Pachter is out with a new research note, sharing his two main expectations. The analyst believes that the U.S. election likely helped to drive time spent and other viewership and engagement metrics higher, boosting CPMs, while a large share of digital advertising budgets continue to flow to Facebook.

Let’s take a closer look:

  1. Facebook Will Deliver Results at or Above Expectations – Pachter expects Q4 results at or above his and consensus’ expectations, which will be driven by continued mobile and video ad momentum, dominant market share, and strength in ad pricing. Pachter expects revenue of $8,487 million and EPS of $1.35, compared to consensus estimates of $8,491 million and $1.31. The analyst has modeled mobile ad revenue to grow by $1.33 billion, or 23% q-o-q in Q4:16, compared to the $1.16 billion, or 34%, q-o-q increase in Q4:15. Furthermore, Pachter expects MAUs to be up 15% y-o-y and up 3% q-o-q in Q4, with roughly 1% q-o-q growth in North America and Europe, and roughly 4% growth in Asia and the Rest of World.
  2. Long-Term Growth in Other Social Media Platforms – Instagram, with more than 500 million MAUs in Q3, has just begun to monetize, and the analyst expects ARPU to reach the current global average within the next two years, adding $4 – 5 billion to revenue growth over that period. WhatsApp and Messenger, with more than one billion MAUs each in Q3, are likely to monetize later and more slowly, but Pachter expects these platforms to add over $3 billion to revenue growth in the next two years.

According to TipRanks, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Michael Pachter has a yearly average return of -3.0% and a 53% success rate. However, Pachter has a 51.5% average return when recommending FB.

Out of the 39 analysts polled in the past 3 months, 36 rate Facebook stock a Buy, while 3 rate the stock a Hold. With a return potential of 17.5%, the stock’s consensus target price stands at $155.19.

 

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