Facebook: Share Price Reaction Is likely To Be Muted Following 2Q14 Results, Says Topeka

Topeka analyst Victor Anthony today issued a note in which he reiterated a Buy rating on Facebook, Inc. (FB) with an $80 price target, ahead of the second quarter results, which will be released tonight. 

Anthony wrote, “We are estimating revenues of $2.864B (+58% YoY), above the consensus of $2.80B (+55% YoY), Adj. EBITDA of $1.637B (57.1% margin), and Non-GAAP EPS of $0.31, vs. consensus of $0.32. We expect FB to exceed our expectations. Our checks throughout the quarter suggest that demand for Facebook’s inventory remains high with pricing once again offsetting impression declines. Checks also show more interest in FB’s ad platform from direct response advertisers. App installs are likely to be another strong contributor to mobile monetization”.  

The analyst continued, “The shares have appreciated 13% since 1Q14 results vs. a 6% increase in the S&P500 on a positive read from consensus checks. While we do expect a beat vs. expectations, share price reaction is likely to be muted. In the past few quarters, FB’s share price has only increased significantly when revenue has exceeded expectations by double digits (see table in note). On the flipside, higher expense growth guidance, which we do not expect, could lead to a negative reaction. Nonetheless, we remain aggressive buyers of the shares as we see meaningful catalysts ahead for the stock.

According to TipRanks.com, which measures analysts and bloggers success rate based on how their calls perform, analyst Victor Anthony has a 18.9% average return and a 68% success rate. Anthony has an 54.4% average return when recommending FB, and is ranked #71 out of 3214 analysts.

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