Alex Cho

About the Author Alex Cho

Best tech/finance blogger on TipRanks. Alex Cho is ranked 7th among all financial bloggers, with a sector focus of technology stocks. The research he publishes captures the long-term growth potential of tech franchises, and market valuation. His research recommendations over the span of five-years has averaged into an annualized return of 19.3% across 392 ratings of which 66% were successful. Over his years of publishing, Alex Cho has been an indispensable source of information for an investment minded audience, which is why his lifetime viewership has exceeded ten million in total since 2012, across various media platforms. Furthermore, he’s frequently cited in various local business journals across the United States, and is frequently tagged with the “in-depth” designation on Google News for his public articles. The quality of his research is well known, and is well-respected which is why he’s frequently cited by other authors, journalists, bloggers and experts. Alex Cho was a former founding partner of Alexander & Cohen Capital Management, has worked as a consultant for mid-stage tech companies looking to raise capital or form an exit strategy, with the most recent consultation billed to a client that was generating revenue of $10 million+ in the web domain/registrar segment. Alex Cho is frequently invited to interview members of management at various Fortune 500 tech companies’ due to his outstanding media credentials, and credibility. Furthermore, he frequently attends various tech media events at the request of the event organizers. Alex Cho has a great relationship with Wall Street and Silicon Valley, as well. In the Venture Capital Space, he has sources that are inclusive of VC Partners, and independent research from PitchBook, Mercury Data, eMarketer, MergermarketGroup, and so forth. Anyone facing the public with investment related material needs quality sources, which should be inclusive of insights from Private Equity and various sell-side institutions and debt rating agencies as well (Standard & Poor’s, Fitch, & Moody’s). Alex Cho publishes with the support of Bank of America Merrill Lynch, Morgan Stanley Americas, Royal Bank of Canada Capital Markets, United Bank of Switzerland AG, Barclays Americas, Goldman Sachs, J.P. Morgan, Credit Suisse AG, PiperJaffray, Wedbush Securities, Oppenheimer & Co., Nomura Securities, BMO Capital Markets, Raymond James, Pacific Crest, SunTrust, Mizuho Securities, Deutsche Bank and Canaccord Genuity. Alex Cho attended ASU via the MAPP program with a 3.76 GPA in business-finance. The genius behind Cho has less to do with his academic accomplishments, but rather his ability to navigate, adapt, and improve the quality of his work through all the activities he has engaged. In the past year, Alex Cho has launched a new marketplace service referred to as Cho’s Investment Research. To learn more about this service, or to receive article notifications, be sure sure to subscribe. We provide frequent updates via our Blog Posts, which goes out to our subscribers.

Facebook (FB) Earnings Preview: The Countdown Begins


Earnings season is here. And that means the biggest players in the market are getting ready to release very important earnings reports. One of those big players is Facebook (FB). The social media giant is set to report first-quarter numbers after the closing bell tomorrow.

Currently, expectations embedded into the growth narrative seem reasonable, and the stock is recovering from a relatively low base with earnings growth to fuel the upside in the stock. Analysts anticipate Facebook to report Q1’19 revenue of $14.97 billion and $1.63 dil. EPS.

Facebook stock has rallied 40% year-to-date, which was driven by a number of factors tied to weakening growth outlook, market correction and issues around privacy. Notwithstanding some of the issues from a public perspective, the company is still anticipated to grow revenue by 25% this quarter, and the company trades at 23.97x times earnings, which makes it heavily undervalued when compared to other companies that trade at way higher of a growth premium.

Should You Count on Facebook Earnings to Push the Stock Higher? Top Analyst Weighs In

 

Ahead of the print, Wedbush Analyst Michael Pachter reiterates his Outperform rating and $200 price target on Facebook stock.

“Our estimates are for revenue of $15.13 billion and EPS of $1.92 vs. consensus of $14.97 billion and $1.63. We anticipate global sequential MAU growth in Q1 of approximately 47 million, down slightly from growth in Q4 of 49 million, and compared to growth in Q1:18 of 67 million. We estimate that global sequential DAU growth of 49 million will slightly outpace MAU growth, as engagement growth across territories will likely be balanced against muted audience growth in developed countries, given the existing size of Facebook’s MAU bases across the U.S., Canada, and Europe. Our revenue growth estimate of 26% year-over-year compares to growth of 30% in Q4, and guidance for a mid-single digit decline relative to the Q4 rate.”

Pachter anticipates that Facebook will deliver a meaningful earnings beat when compared to consensus expectations, as the firms EPS target implies a $0.29 beat on EPS expectations. User growth will slow but given Facebook’s impressive base of users they certainly have runway to deliver on ARPU (average revenue per user) metrics internationally, as ad pricing is lower in the international segment, and opportunities to monetize users in other formats could be introduced to keep advertisers engaged with the self-serve platform along with a host of new ad-inventory for monetizing messenger and Instagram stories impression growth.

Pachter also mentioned in his report that operating expenses likely to trend lower than what management offered as guidance. It could be the case, that Facebook did sandbag expectations tied to cost ramp, as it’s difficult to anticipate why such a spending increase is justified given the estimated 40,000 headcount additions. A less aggressive spending ramp could be in the cards, as it’s difficult to scale a workforce that quickly, as you would need to increase office leasing activity, have an enlarged pool of qualified applicants, and integrate those new workers into the company effectively. This might sound ironic, but this is the same type of activity that got Twitter into a lot of trouble with over-spending several years ago before Jack Dorsey took over and had to announce two layoffs during the past couple years.

Some of the spending increase could be tied to project related spending, but even that seems like a bit of a stretch given the cost of a project is tied to the amount of labor needed to work on the project. When looking at prior-year hiring activity, Facebook hired 10,000 people worldwide. So, they would need to hire at 4x the rate of prior-year to match the expense guidance, which just doesn’t seem feasible given the rate at which the organization has scaled.

Not to mention, Facebook’s commercial office leasing activity doesn’t match the pace needed for 40,000 workers in the current fiscal year, so if anything, Facebook is positioned to ramp spending at a more modest pace than its 40% to 50% anticipated growth in operating expenses this year.

Bottom Line

Overall, investors should anticipate a solid earnings report (likely more profitable), and even if growing headcount is a priority, we shouldn’t anticipate much more than perhaps 20,000 additional hires this year given pre-existing leasing activity in various areas around San Francisco, Seattle, Chicago and New York.

Sentiment ahead of Facebook earnings bodes well. This “Strong Buy” (according to TipRanks) stock has received 34 ‘buy’ ratings in three months vs. 6 ‘hold’ and one ‘sell’ ratings. (See FB’s price targets and analyst ratings on TipRanks)

 

Disclosure: The author has no position in Facebook stock.

 

Stay Ahead of Everyone Else

Get The Latest Stock News Alerts