Top Analyst Sets Expectations on Facebook (FB) Ahead of Today’s 2Q:18 Earnings


Social giant Facebook (NASDAQ:FB) is set to release its quarterly earnings report after the closing bell today, which might give investors pause after the negative spin cycle of news out of Menlo Park, Calif.

SunTrust’s top analyst Youssef Squali believes that despite all the negative headlines, ad revenue should continue to drive very healthy growth. The analyst noted, “Despite the enactment of GDPR and the negative headlines surrounding the company throughout the quarter, we believe ad revenue growth will come from strength in all geographiess: with North America +37% y/y ($6,102M), Europe +48% y/y ($3,263M), Asia +47% y/y ($2,282M), and RoW +45% y/y ($1,369M) on a reported basis.”

Squali maintains 2Q18 revenues, adj. EBITDA, and GAAP EPS expectations of $13,167M/$7,659M/$1.74, compared to consensus estimates of $13,334/$8,104/$1.71, respectively.

Looking ahead, the analyst’s 2018 revenue/adj. EBITDA estimates are $55,515M/$33,307M vs. Street expectations of $56,830M/$34,960M, while his 3Q18 estimates are $13,596M/$7,797M vs. Street expectations of $14,247M/$8,653.

Squali concluded, “While the company has suffered several major PR setbacks so far, we believe fundamentally the company remains in a very strong place. 1) our checks with advertisers combined with management commentary reveal that by and large they have not altered spending on the platform […] 2) changes made to News Feed, which led a 5% decline in time spent (50 million hours/day) was made from a position of strength late last year […] 3) while last quarter’s user growth decelerated, we believe it confirmed our belief that there was no user exodus as a result of fallout from events around Cambridge Analytica (Private), 4) Instagram shows solid growth passing the 1 billion MAU mark in June […] 5) we believe at the moment additional regulatory action is unlikely given the recency of GDPR and the company’s decision to voluntarily become globally GDPR compliant.”

As such, ahead of the big event, Squali reiterates a Buy rating on Facebook stock, with a price target of $230, which implies an upside of 7% from current levels.

According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Youssef Squali has a yearly average return of 22.2% and a 73% success rate. Squali has a 29.3% average return when recommending FB, and is ranked #49 out of 4835 analysts.

 

 

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