Facebook’s Messenger Monetization at Center Stage
After releasing announce second-quarter results Facebook Inc (NASDAQ:FB), the company has proven once again that it can continue to fire on all cylinders. Top analyst Victor Anthony of Aegis notes that from advertising revenue growth to operating margins and earnings per share, the company continues to outperform expectations. The social media giant’s investors took the outclass well, sending shares on a 5% climb today.
Even the relatively new Messenger monetization, while not advancing as fast as CEO Mark Zuckerberg would like is ramping nicely and helping Facebook to increase its share in the industry ad dollars. Facebook took $5.58 billion in advertising dollars only second to Google, which captured $6.92 billion. Considering that the company has continued its “impressive streak of quarterly outperformance,” the analyst is increasing both 2018 revenue estimates by 1%.
Though driven by impression growth of 19% and pricing growth of 24%, Facebook’s Ex-FX advertising revenue fell short of the first quarter results, but still marked an impressive 49% year over year, reaching $9.164 billion and beating out Anthony’s estimate by 2%. The company’s reported total revenue was above the analyst’s estimate by 9% at $9.321 billion or 47% year over year, while GAAP operating margin soared 41% above forecasting hitting 47.2% or 500bps year over year.
Anthony mentions that “the past three earnings calls was reiterated, along with the expected desktop growth deceleration, and growth of video slowing impression growth.” With this said, the analyst points to a few factors, which will help to offset these trends, “ad demand/pricing in addition to Instagram growth to serve as partial offsets […] messenger monetization would not (immediate) offset the slowdown in ad growth from the above factors in the near-term, we see an offset in 2H18.”
As such, the analyst reiterates a Buy on FB while increasing the price target from $185 to $200, which implies a close to 15% rise over current levels.
Victor Anthony has a good TipRanks score with a 65% success rate and is ranked #113 out of 4,160 analysts. When recommending FB, Anthony yields 47.4% in average profits on the stock. On overall yearly returns, Anthony earns 13.7%.
TipRanks analytics reveal FB as a Strong Buy. Out of 36 analysts polled by TipRanks in the last 3 months, 32 are bullish, 3 neutral and 1 bearish. With and upside of 3%, the stock’s consensus target price stands at $181.00.
Can Advanced Micro Devices’ Ryzen Compete in the Big Leagues?
Upon reporting second quarter results on Tuesday, Advanced Micro Devices, Inc. (NASDAQ:AMD) not only just beat out the Street by $1.22 billion to $1.16 billion, but also raised its annual revenue growth guidance by several percentage points to mid-to-high-teens. While the results are driven by current demand for Ryzen CPUs and GPUs, even the company admits inventory is “lean.” Analyst Rick Schafer of Oppenheimer questions the efficacy of PYC server CPUs, Vega high-end GPUs, and the ability for the products to penetrate the market- especially when going up against big chip maker competitors like Intel and Nvidia.
Schafer points to recent growth, stating: “AMD is up 24% YTD (SOX +22%) following 2016’s nearly 300% bounce. Hence we believe shares are pricing in expectations that AMD will secure significant share gains vs deep-pocketed incumbents INTC/NVDA.” However, the optimistic tone does come with caution, as the analyst notes: “While early Ryzen (PC) feedback has been positive, it remains unclear whether AMD can gain material high-end CPU/GPU share vs. INTC/NVDA. Management’s mid-term goal for EPYC server CPUs is to reach >10% market share, which it believes will take multiple quarters.” Subsequently, Schafer feels “hesitant to confidently forecast the growth needed to drive significant and sustainable earnings […]”
On a more positive note, the analyst expects the company “to be FCF-positive in 2017 despite CapEx guidance implying a $70M step-up in 2H17 vs 1H17 ,” despite burning $416 million in free cash flow during the first quarter of 2017. Subsequently, the analyst is confident earnings per share will increase in 2017 from $0.02-$0.15 and in 2018 from $0.08 to $0.20, which is slightly below the Street’s estimate. The company hopes to capture more market share via its Vega GPUs launched in June, but has yet to see results.
For now, the analyst maintains a Perform rating on AMD without listing a price target. (To view Schafer’s performance, click here.)
TipRanks analytics reveal AMD as a Buy. Out of 22 analysts polled by TipRanks in the last 3 months, 9 are bullish on Google stock, 10 are neutral and 3 are bullish. With a potential downside of 5%, the stock’s consensus target price stands at $13.88.