Whereas Facebook Inc (NASDAQ:FB) is standing tall after strong revenue results in its fourth quarter, GoPro Inc (NASDAQ:GPRO) is quaking under the wake of sales and revenue shortcomings. Wedbush sees no ifs, ands, or buts about it- Facebook is a stock with compelling value to buy. However, Oppenheimer underscores a far murkier future facing GoPro, a company in need of a resurgent comeback in 2017. Let’s dive in:
Facebook Is a Great Company, Period: Wedbush
Even when Facebook hits “aggressive” expense guidance, the social media giant ‘s “outsized revenue growth” manages to offset any negatives, keeping Wedbush analyst Michael Pacther firmly in FB’s corner. Therefore, after the giant released fourth-quarter earnings on February 1st, the analyst reiterates an Outperform rating on shares of FB while lifting the price target from $162 to $175, which represents a 33% increase from where the stock is currently trading.
Carrying “substantial upside on user growth and lower operating expenses,” FB posted $8,809 million in revenue, handily beating both consensus expectations of $8,491 million as well as the analyst’s forecast of $8,487 million. From the analyst’s eyes, this outclass rode a robust wave of mobile advertising and user growth. EPS of $1.41 also outperformed expectation, compared to Pacther’s estimated EPS of $1.35 and consensus of $1.31. Mobile advertising revenue accounted for 84% of the $8,629 million in total advertising revenue, which denotes a close to $3.0 billion rise in mobile ad growth year-over-year.
Pacther advises, “Expect expense growth to fall short of guidance in 2017,” continuing, “Ad load growth rates will slow in order to preserve the user experience, but we expect user growth and advertiser demand around new ad products to more than offset the impact to revenues in 2017. […] We suspect that revenue growth will again outpace expectations and expenses will once again fall short, despite the company’s aggressive hiring spree.”
“Facebook has a huge competitive advantage with nearly 1.9 billion monthly active users and over 1.2 billion daily active users, attracting 4 million advertisers to its captive and desirable audience. We expect rapid growth overseas, and expanded monetization of under-penetrated Instagram, WhatsApp, and Messenger over the coming years. Facebook’s initiatives position it for long term growth, which we anticipate to continue for the next decade. In summary, we believe Facebook is a great company, period,” Pacther contends.
As usual, we recommend taking analyst notes with a grain of salt. According to TipRanks, one-star analyst Michael Pachter is ranked #3,274 out of 4,374 analysts. Pachter has a 0% success rate and risks a loss of 8.0% in his yearly returns.
TipRanks analytics reveal FB as a Strong Buy. Based on 36 analysts polled by TipRanks in the last 3 months, 33 rate a Buy on FB stock while 3 maintain a Hold. The 12-month average price target stands at $160.03, marking a 22% upside from where the shares last closed.
GoPro Should Kill Karma ASAP to Rise Above Cash Burn: Oppenheimer
GoPro shares were falling nearly 13% after the action-video camera maker posted a disappointing fourth-quarter print that has left Oppenheimer analyst Andrew Uerkwitz questioning if any profit exists in sight for the troubled company. As such, the analyst remains wary on the company’s prospects and reiterates a Perform rating on GPRO without listing a price target.
For the fourth quarter, GPRO reported $541 million in revenues, which underperformed both the analyst’s expectation calling for $583 million as well as consensus of $576 million. Positively, revenues saw a 24% year-over-year rise and camera shipments experienced a 14% surge in growth on back of the Hero 5, which shipped 10% more than the Hero 4 achieved in its launch quarter. Additionally, EMEA and APAC hit new record highs in sales, with EMA attaining 64% year-over-year growth and APAC securing 103%. However, domestic sales dipped 3% year-over-year. Gross margin reached 40%. Additionally, ASP increased 8% year-over-year, which the analyst attributes to a realigned product portfolio.
Uerkwitz opines, “First-quarter 2017 revenue and margin guidance is much lower than expected due to high Hero5 inventory in the channel, low volume, and unfavorable mix. Management openly acknowledged recent missteps. The CEO outlined five priorities in 2017 for the company to return to profit, which focus on operational efficiency, international expansion, and better product-market fit. We applaud management’s commitment to turn the business around and believe many of the tactics will benefit GoPro if executed well. However, we hope to see more aggressive turnaround efforts, as multiple headwinds likely will continue to pressure camera sales, drones sales, and software and services in 2017.”
Overall, the picture does not look bright for GoPro and the analyst spotlights only uphill challenges ahead. “We believe a vicious cycle has started: camera sales will continue to be compressed by a shrinking addressable market, which will make it difficult for GoPro to invest enough in and attract talent for its software and non-camera products, resulting in a perpetual decline in brand value and cash balance,” Uerkwitz concludes.
According to TipRanks, which measures analysts’ and bloggers’ success rate based on how their calls perform, four-star analyst Andrew Uerkwitz is ranked #754 out of 4,374 analysts. Uerkwitz has a 52% success rate and gains 5.6% in his annual returns. When recommending GPRO, Uerkwitz garners 9.6% in average profits on the stock.
TipRanks analytics indicate GPRO as a Sell. Out of 15 analysts polled by TipRanks in the last 3 months, 1 is bullish on GoPro stock, 7 remain sidelined, and 7 are bearish on the stock. With a loss potential of 9%, the stock’s consensus target price stands at $8.69.