Facebook (FB) may be taking it on the chin as a stock lately, but that doesn't have anything to do with the fundamentals. If anything, the kings of the social network are outdoing even the most bullish expectations. Count Michael Pachter of Wedbush as one of the analysts barely able to keep up with Facebook's growth.
"I'm not one who raises price targets every two weeks because I'm not used to stocks that outperform my price target, but this one is causing me heartache," Pachter tells me in the attached video. "I actually think is a great company that's worth a ton. The real question is the pace at which they grow those earnings."
Last quarter Facebook trounced expectations, particularly in the percentage of advertising dollars coming from its mobile platform. The triumph not only answered one of the lingering questions about Facebook, but it sent the stock on a tear.
Facebook shares have more than doubled since, leaving bulls to wonder what they can do for an encore. Patcher says CEO Mark Zuckerberg has no shortage of options. Whether it's from mobile commercials, video uploads, or simple platform improvements, Facebook execs may have an embarrassment of riches.
Right now the consensus Q3 earnings estimate for Facebook is 0.19 cents of earnings on $1.91 billion in revenue; the company reports after the bell on the 30th. The earnings question is basically whether or not Facebook opts for rapid EPS growth over spending increases. Amazon (AMZN) has managed to convince Wall Street not to care about EPS growth, but Facebook may not have that luxury.
If earnings rate and profit growth stay in synch, the stock works in the short term. If Facebook expenses swell, the company will simply have to prove it knows how to invest wisely.
Either way, with how far the company has come so far, Facebook bears are becoming an endangered species.
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