U.S. Markets closed

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

support@smarteranalyst.com (Ben Mahaney)

Social media giant Facebook (FB) endured a year of Congressional hearings, increased regulation of its platform and rampant scandals, yet the company is still a money-money making machine. This Wednesday, the company will release its first-quarter earnings, as it hopes to show investors that it continues to grow at a torrid pace.

Ahead of the report, Baird's top analyst Colin Sebastian believes Facebook stock will move higher over the long term, as he reiterates an Outperform rating and $195 price target. According to TipRanks, which measures analysts’ and bloggers’ success rate based on how their calls perform, Sebastian has a yearly average return of 24.7% and a 72% success rate. Notably, Sebastian is ranked #26 out of 5,193 analysts.

Facebook's surging stock price (up 40% year-to-date) comes as the company's revenue and earnings per share are soaring, driven by strong advertiser demand and continued growth. Sebastian believes advertiser demand remains healthy, and expects in line to better-than-expected Q1 results. 

Facebook (FB) Stock Remains a ‘Buy’ Ahead of Earnings, Says Monness

 

Sebastian sees “a continued decline in CPMs (we estimate -7% Y/Y vs. -2% in 4Q18) as a result of the mix shift in ad formats and geographies,” but believes "this should be partially offset by accelerating impression growth (estimating +25% Y/Y vs. +22% in 4Q18)." Overall, the analysts estimates revenue at $15.2 billion and EPS at $1.51, both above consensus.

Sebastian says, "Our checks continue to suggest positive trends for the Facebook ecosystem (Instagram particularly strong), despite headline concerns over platform privacy and safety. Management continues to highlight the growing contribution from new channels/formats (e.g., Stories) while Messenger remains an area of increased focus, potentially a highlight at the upcoming F8 conference next week.”

The analyst added, “Instagram, video, and mobile ad inventory continue to show outsized growth, while dynamic product ads, carousel ads, and video ads now account for the majority of total social spending.” The analyst estimates “that Instagram accounted for $12-$14B of revenue in 2018, and will exceed $20B in 2019,” but is “hoping for greater disclosure” on the platform.

While Facebook is a favorite among critics, it is also a favorite in the stock market. TipRanks analysis of 41 analysts shows a consensus Strong Buy. 34 of those analysts rate Facebook stock a Buy, while six issue Hold and only suggests Sell. The average price target among these analysts stand at $195.03, which implies a 7% upside from current levels. (See FB's price targets and analyst ratings on TipRanks)

 

Read more on FB:

 

More recent articles from Smarter Analyst: