Canaccord Highlights Strengths and Weaknesses for Facebook Inc (FB) and Glu Mobile Inc. (GLUU) Ahead of Q3 Results

Earnings season is about to bring in some key tech stock updates from Facebook Inc (NASDAQ:FB) and Glu Mobile Inc. (NASDAQ:GLUU) this week. Canaccord analyst Michael Graham is chiming with quite a bullish forecast for Facebook’s third-quarter print, one which he expects will be yet another robust chapter in FB’s earnings book, not phased by rival Snapchat. However, when it comes to Glu Mobile, Graham makes a case for a different, riskier tale and exercises a great deal of caution as he underscores the various challenges confronting GLUU’s quarter results.

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 Michael Graham is ranked #212 out of 4,178 analysts. Graham has a 52% success rate and gains 8.2% in his annual returns. When recommending FB, Graham earns 29.6% in average profits on the stock. However, when suggesting GLUU, Graham loses 8.4% in average profits on the stock.

Let’s take a closer look:

Facebook Inc

Tomorrow, November 2nd, Facebook is preparing to deliver what Graham anticipates will be another stellar notch in a belt of solid quarters and “positive stock moves” for the social media giant.

In FB’s well-rounded rising arc that tells the tale of a giant who continues to surge, Graham he cannot help but wonder, “We are consistently asking ourselves when the beat and raise music might stop. That said, we continue to find the company’s multi-faceted growth appealing.”

Therefore, the analyst reiterates a Buy on shares of FB with a $160 price target, which represents just under a 22% increase from current levels.

For the third quarter, the analyst projects monthly active users (MAUs) will rise 13.1% in year-over-year growth to reach 1,748 million, just under consensus of 1,758 million. Additionally, the analyst forecasts daily active users will increase 14.5% to 1,154 million, just shy of the Street’s estimate of 1,157 million.

Graham believes advertising revenue will bring in $6,406 million for the giant, also under the Street’s expectations for $6,713 million. With regards to total revenue, Graham is calling for $6,586 million, a marked 46.3% boost in year-over-year growth, falling below consensus of $6,908 million. Graham anticipates non-GAAP operating income to hit $3,596 million, compared to the Street’s $3,801 million. For non-GAAP EPS, the analyst models $0.90, six cents short of the Street’s $0.96.

“The user base and engagement are still expanding, and Instagram, WhatsApp, and Messenger are still largely untapped opportunities. While competition from Snapchat is intensifying, we believe advertisers are leaning away from embracing Twitter as a viable second source for social advertising (not TWTR’s mid-single digit revenue growth), and this should be a positive for FB. While the core Facebook newsfeed ad load may be topping out as we exit the year, we continue to find advertiser enthusiasm to be high and we think the company remains poised to deliver solid growth,” Graham concludes.

TipRanks analytics exhibit FB as a Strong Buy. Based on 26 analysts polled in the last 3 months, 25 rate a Buy on FB, while 1 maintains a Hold. The 12-month price target stands at $162.13, marking a nearly 24% upside from where the shares last closed.screen-shot-11-01-16-at-01-15-pm

Glu Mobile Inc.

In what Graham calls the “post-Kim Kardashian era,” he errs on the side of caution when it comes to Glu Mobile’s prospects and the pressures it faces heading into third-quarter results. Can the stock rise above the present “fatigue” the analyst detects plaguing game rankings? So far, games like Katy Perry, Kylie & Kendall, and Britney Spears came up “short” despite notably riding tides of great anticipation.

From the analyst’s perspective, he remains sidelined and subsequently reiterates a Hold rating on GLUU with a price target of $3, which represents a close to 52% increase from where the shares last closed.

In these post-Kim K times, “The game still contributes meaningfully to bookings, but the lack of a big hit is hurting sentiment and likely bookings. Several games that were highly anticipated have fallen short, including Katy Perry, Kylie & Kendall, and Britney Spears. With the game pipeline constantly shrinking, it seems that execution is becoming more difficult for the company. Management did outline a new strategy that focused on doubling down on evergreen franchises and titles. We do believe there is potential risk to 2016 bookings guidance as it looks like Nicki Minaj: The Empire has been delayed into Q4,” Graham surmises.

Amid a “shrinking pipeline” and the Nicki Minaj game delay rendering GLUU’s third quarter without a launch, steep competition, and older games continuing to “drift lower,” weighed down by sluggish fatigue, the analyst believes the leading global developer and publisher of free-to-play games for smartphone and tablet devices “will need another meaningful hit.”

GLUU is expected to release third-quarter earnings on Thursday, November 3rd after market close. For the third quarter, Graham forecasts $50 million in bookings, just under the Street’s projection of $51 million. The analyst expects adjusted EBITDA of ($4), which mirrors consensus. For non-GAAP EPS, Graham calls for ($0.03), compared to consensus of ($0.12). For the financial year of 2017, Graham projects bookings of $218 million and anticipates “downside risk” to his estimate.

TipRanks analytics demonstrate GLUU as a Hold. Based on 4 analysts polled in the last 3 months, all maintain a Hold on GLUU. The consensus price target stands at $2.38, marking a 20% upside from where the stock is currently trading.screen-shot-11-01-16-at-01-16-pm

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