What to Expect From Facebook Inc (FB) and Yahoo! Inc. (YHOO) This Earnings Season: Needham

Needham’s top-ranked analyst Laura Martin weighed in with her forecast on the social media giant Facebook Inc (NASDAQ:FB) and internet search giant Yahoo! Inc. (NASDAQ:YHOO), ahead of the upcoming third-quarter earnings.

Facebook Inc

Martin reiterated a Buy rating on shares of Facebook, with a price target of $115, as the company is scheduled to report its third-quarter earnings after the bell on Wednesday, November 4, 2015.

Martin wrote, “We maintain our 3Q15 estimates for FB at Revenue of $4.4B (up 37% y/y), Non-GAAP Operating Income of $2.5B (up 37% y/y), and Non-GAAP EPS of $0.49 (up 12% y/ y). We are buyers of FB based on our belief that digital markets are “winner take all markets” and that FB is particularly well positioned owing to its always-registered environment with real names, its closed platform, global scale, ubiquitous distribution, and optionality of new revenue streams (video, payments, commerce, etc) on the core FB site as well as revenue growth potential from FBs other key apps including Instagram WhatsApp, and FB Messenger.”

According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Laura Martin has a total average return of 25.3% and a 71.4% success rate. Martin has a 34.5% average return when recommending FB, and is ranked #15 out of 3772 analysts.

Out of the 46 analysts polled by TipRanks, 41 rate Facebook stock a Buy, 4 rate the stock a Hold and 1 recommends a Sell. With a return potential of 18.5%, the stock’s consensus target price stands at $110.13.

Yahoo! Inc.

With Yahoo preparing to release third-quarter earnings after the market closes on Tuesday, October 20, 2015, Needham’s Laura Martin weighed in today with some estimate revisions. According to TipRanks, Martin has a 18.9% average return when recommending YHOO.

Martin wrote, “We maintain our 3Q15 estimates of net revenue of $1.02B (down 7% y/y) and Non-GAAP EPS of $0.17 (down 68% y/y), but we lower estimates for 4Q15, FY15 and FY16, based on slower growth rates and lower profitability estimates. We now expect FY15 revenue of $4.2B (down 5% y/y, 4% below previous estimates), and Non-GAAP EPS of $0.69 (down 57% y/y, 4% below previous estimates). We lower FY16 estimates to revenue of $4.12B (down 1% y/y, 5% below previous estimate), and Non-GAAP EPS of $0.69 (flat y/y, 16% below previous estimates). Due to lower FY16 estimates and higher WACC tied to rising risk, we lower our 12-month Target Price to $40 (from $55). We maintain our Buy rating based on a sum-of-the parts analysis that concludes that investors are getting YHOO’s core business for “free” despite $988mm of expected EBITDA in FY16E.”

Out of the 32 analysts polled by TipRanks, 21 rate Yahoo! stock a Buy, while 11 rate the stock a Hold. With a return potential of 44%, the stock’s consensus target price stands at $46.92.


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