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Last Minute Thought: Buy or Sell Facebook (FB) Stock Before Q1’19 Earnings?


OK, Facebook (FB). It’s officially earnings season again, and time to show investors what you’re made of.

The social media giant is set to release first-quarter 2019 results after the market close today, and investors and analysts will pay close attention, hoping to glean insights worthy of an investment thesis from the company’s financial data and management’s comments. The report will be packed with enough data to confound and befuddle the unprepared investor.

RBC’s top analyst Mark Mahaney is expecting revenue, operating income, and GAAP EPS of $14.73B, $4.55B, and $1.39, respectively, well below Consensus estimates of $14.97B, $5.37B, and $1.62 for Q1:19.

Mahaney noted, “We are at the conservative end of FB’s guidance, which called for revenue growth rates to decelerate by a mid-single-digit percentage on a constant currency basis in Q1 compared to Q4 (RBC at 6% vs. the Street at 4%) and for 40-50% Total Expense growth for FY19 (RBC at 48% vs. the Street at 42%). We would expect FB to reiterate its initial FY19 outlook for Opex Growth guidance of 40%-50%, along with its 2019 CAPEX guidance of $18B-$20B, and for revenue growth to decelerate sequentially through 2019 on a constant currency basis.”

“Based on intra-quarter data points, and our model sensitivity work, we view Street March quarter estimates as ballpark reasonable, though we see no clear evidence to support upside variance. We believe FB is correctly committed to aggressive investment spend, and we are unsure whether Street estimates fully capture this,” the analyst concluded.

Mahaney reiterates an Outperform rating on Facebook stock, with $200 price target, which implies nearly 10% upside from current levels. (To watch Mahaney’s track record, click here)

SunTrust’s analyst Youssef Squali added, “We expect FB to report slightly better than expected 1Q19 results, and reiterate prior OpEx/CapEx guidance. While the news flow and regulatory environment remain unfavorable to the company, our industry checks suggest that advertiser demand remains strong and user engagement healthy. Instagram, video and mobile were key growth drivers in 1Q19, maintaining FB as a must-buy platform to reach targeted audiences at scale while generating positive ROI. Strong positioning and a compelling valuation keep us positive on FB.”

“While we are modeling for Facebook’s revenue growth to continue to decelerate, we believe 1Q19 will show healthy Y/Y growth that’s slightly ahead of Street expectations, nonetheless. Our intraquarter conversations with marketers support this view,” the analyst continued. Squali maintains a Buy rating on FB with a $210 price target. (To watch Squali’s track record, click here)

Overall,Wall Street’s confidence backing the social media titan is strong, with TipRanks analytics showcasing FB as a Strong Buy. Based on 40 analysts polled in the last 3 months, 34 rate the stock a, while 6 rate it a Hold. The 12-month average price target stands at $197.17, marking a nearly 8% upside from where the stock is currently trading. (See FB’s price targets and analyst ratings on TipRanks)

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