Facebook (FB): Top Analyst Gives Cautious 1Q18 Print Preview

Stifel's Scott Devitt remains apprehensive on FB in his Q1 earnings preview, wary of sluggish revenue growth and business implications in a post-Cambridge Analytica era.


It’s that time of year: analysts are winding up for a fresh batch of tech earnings. Facebook, Inc. (NASDAQ:FB) is fixing up to release its first quarterly print since the aftermath of the Cambridge Analytica data leak shook up investors sentiment. Top analyst Scott Devitt at Stifel approaches the social media titan in his earnings preview from the sidelines, noting daily active user (DAU) trends will prove meaningful amid Street “noise” circling privacy challenges.

In anticipation of Wednesday evening’s first quarter print of 2018, the analyst maintains a Hold rating on FB stock with a $168 price target, which implies a just under 1% upside, essentially aligning with current trading levels.

“Our and consensus forecasts reflect moderately decelerating revenue growth, and we do not expect a material impact to the company’s ad business in 1Q results from recent events. 1Q agency checks for Facebook / Instagram support that view. […] DAU trends are also of high importance, though there may be some noise in the quarter due to increased media attention around Facebook’s privacy issues,” writes Devitt.

For the first quarter, the analyst calls for a 42% year-over-year rise to roughly $11.43 billion in revenue from FB, a bit above consensus of $11.41 billion, and forecasts ad revenue to jump 43% year-over-year. Notably, in the fourth quarter of 2017, ad revenue surged 44% year-over-year on a foreign exchange advantage. The analyst looks for impression growth to keep moderating in the first quarter from 4% year-over-year in the fourth quarter and 10% year-over-year in the third quarter of 2017 to 3% year-over-year. Likewise, the analyst predicts pricing growth will wind down from 43% year-over-year in the fourth quarter to 39% year-over-year in the first quarter. From a rate of 14.5% year-over-year in the fourth quarter, the analyst projects the company’s total monthly active users (MAUs) will experience 13.1% year-over-year growth in the first quarter to 2.19 billion with an 11.8% year-over-year rise in DAUs to 1.44 billion.

Devitt concludes cautious, but with some breathing room for positivity: “Should recent negative engagement trends in North America and Europe persist, we believe forward engagement estimates could prove optimistic. Overall, we continue to see heightened risk around regulation, consumer trust, and consumer usage levels of the platform. At 19x 2019E GAAP EPS shares appear to reflect known risks to a degree, however we remain Hold rated with a $168 price target as we await further visibility on the above-mentioned risks.”

Scott Devitt has a very good TipRanks score with a 73% success rate and one of the most stellar rankings on the Street: #36 out of 4,776 analysts. Devitt garners 25.5% in his yearly returns. When recommending FB, the analyst yields 36.8% in average profits on the stock.

This social media titan has amassed solid popularity among Wall Street analysts, according to TipRanks analytics. Out of 34 analysts polled in the last 3 months, 31 rate a Buy on FB stock, 2 maintain a Hold, while just 1 issues a Sell on the stock. Notably, the 12-month average price target stands at $219.33, marking 32% in return potential for the stock.

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