Shares of Facebook opened lower but quickly bounced into the green on Tuesday morning. The popular social media stock is resting slightly below its 52-week high right now, less than two trading periods before the company is scheduled to release its latest quarterly earnings report.
Facebook has been a must-own internet stock for years now, but the Mark Zuckerberg-led technology behemoth currently finds itself at what could be a major turning point. After months of criticism related to its failure to properly vet content on its website, Facebook has pledged to invest “so much in security that it will impact [its] profitability.”
The state of the Facebook user experience has caused a significant PR headache for management. Nevertheless, the company’s shift to a video-first focus should help it deliver solid top and bottom line results once again.
Latest Outlook
Our current consensus estimates are calling for Facebook to report quarterly earnings of $1.96 per share and revenues of $12.58 billion later this week. These results would represent year-over-year growth rates of 39.0% and 42.8%, respectively. But of course, total earnings and revenue are just two of the many things investors will be looking at when Facebook reports on Wednesday.
It is entirely possible that the Facebook’s post-earnings momentum is based on its performance in what investors have determined to be its key report items, especially if the stock hopes to shake off concerns about security spending.
To prepare for this, we can turn to our exclusive non-financial metrics consensus estimate file. The Zacks Consensus NFM file contains detailed estimate data for business segment metrics and non-financial metrics reported by companies. The data is acquired from digest and contributing broker models and includes the independent research of expert stock market analysts.
Based on our latest consensus estimates, we expect Facebook to report that monthly active users (MAUs) reached 2.134 billion in the quarter. There will come a time when the platform’s MAU growth stagnates, but this result would represent growth of about 14.7% year-over-year and 3.0% sequentially. It goes without saying that this is a remarkable rate for such an established website.
Meanwhile, investors will likely want to track Facebook’s average revenue per user (ARPU) figure. With the push to video hopefully inspiring advertisers to pay more for visual content, the ARPU figure gives us a great snapshot of how Facebook is able to capitalize on its audience.
Our consensus estimate file is currently calling for Facebook to report ARPU of $5.89 for the quarter. This result would mark growth of 21.9% year-over-year and 16.2% sequentially.
Earnings ESP Whispers
Investors will also want to anticipate the likelihood that Facebook surprises investors with better-than-anticipated earnings results. For this, we turn to our Earnings ESP figure.
Zacks Earnings ESP (Expected Surprise Prediction) looks to find earnings surprises by focusing on the most recent analyst estimates. This is done because, generally speaking, when an analyst posts an estimate right before an earnings release, it means that they have fresh information which could potentially be more accurate than what analysts thought about a company two or three months ago.
A positive Earnings ESP paired with a Zacks Rank #3 (Hold) or better ranking helps us feel confident about the potential for an earnings beat. In fact, our 10-year backtest has revealed that this methodology has accurately produced a positive surprise 70% of the time.
As we approach its report date, Facebook is sporting a Zacks Rank #2 (Buy) and an Earnings ESP of 0.68%. This is because the company’s Most Accurate Estimate for earnings sits at $1.97 per share, meaning that the most recent analyst estimates have been higher than the consensus. This improved outlook is a good sign heading into the report.
Price Performance and Surprise History
Another important thing to consider ahead of Facebook’s report is the company’s history of earnings surprises and the effect that these surprises have had on share prices.
As we can see, Facebook has garnered a strong earnings surprise streak. The company has successfully met or surpassed earnings estimates in nine-consecutive quarters. However, a positive earnings surprise has not always resulted in an immediate surge in share prices.
Facebook investors should also expect the stock to move based on anything that the company might say about guidance or its aforementioned plans to spend more on security. Another thing to remember is that most tech firms have been taking one-time charges related to the recent U.S. tax reform bill. These charges have led to major differences between adjusted and GAAP earnings figures, but they have also inspired favorable forward-looking earnings guidance.
Want more analysis from this author? Make sure to follow @Ryan_McQueeneyon Twitter!
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Should You Buy Facebook (FB) Ahead of Earnings?
Shares of Facebook opened lower but quickly bounced into the green on Tuesday morning. The popular social media stock is resting slightly below its 52-week high right now, less than two trading periods before the company is scheduled to release its latest quarterly earnings report.
Facebook has been a must-own internet stock for years now, but the Mark Zuckerberg-led technology behemoth currently finds itself at what could be a major turning point. After months of criticism related to its failure to properly vet content on its website, Facebook has pledged to invest “so much in security that it will impact [its] profitability.”
The state of the Facebook user experience has caused a significant PR headache for management. Nevertheless, the company’s shift to a video-first focus should help it deliver solid top and bottom line results once again.
Latest Outlook
Our current consensus estimates are calling for Facebook to report quarterly earnings of $1.96 per share and revenues of $12.58 billion later this week. These results would represent year-over-year growth rates of 39.0% and 42.8%, respectively. But of course, total earnings and revenue are just two of the many things investors will be looking at when Facebook reports on Wednesday.
It is entirely possible that the Facebook’s post-earnings momentum is based on its performance in what investors have determined to be its key report items, especially if the stock hopes to shake off concerns about security spending.
To prepare for this, we can turn to our exclusive non-financial metrics consensus estimate file. The Zacks Consensus NFM file contains detailed estimate data for business segment metrics and non-financial metrics reported by companies. The data is acquired from digest and contributing broker models and includes the independent research of expert stock market analysts.
Based on our latest consensus estimates, we expect Facebook to report that monthly active users (MAUs) reached 2.134 billion in the quarter. There will come a time when the platform’s MAU growth stagnates, but this result would represent growth of about 14.7% year-over-year and 3.0% sequentially. It goes without saying that this is a remarkable rate for such an established website.
Meanwhile, investors will likely want to track Facebook’s average revenue per user (ARPU) figure. With the push to video hopefully inspiring advertisers to pay more for visual content, the ARPU figure gives us a great snapshot of how Facebook is able to capitalize on its audience.
Our consensus estimate file is currently calling for Facebook to report ARPU of $5.89 for the quarter. This result would mark growth of 21.9% year-over-year and 16.2% sequentially.
Earnings ESP Whispers
Investors will also want to anticipate the likelihood that Facebook surprises investors with better-than-anticipated earnings results. For this, we turn to our Earnings ESP figure.
Zacks Earnings ESP (Expected Surprise Prediction) looks to find earnings surprises by focusing on the most recent analyst estimates. This is done because, generally speaking, when an analyst posts an estimate right before an earnings release, it means that they have fresh information which could potentially be more accurate than what analysts thought about a company two or three months ago.
A positive Earnings ESP paired with a Zacks Rank #3 (Hold) or better ranking helps us feel confident about the potential for an earnings beat. In fact, our 10-year backtest has revealed that this methodology has accurately produced a positive surprise 70% of the time.
As we approach its report date, Facebook is sporting a Zacks Rank #2 (Buy) and an Earnings ESP of 0.68%. This is because the company’s Most Accurate Estimate for earnings sits at $1.97 per share, meaning that the most recent analyst estimates have been higher than the consensus. This improved outlook is a good sign heading into the report.
Price Performance and Surprise History
Another important thing to consider ahead of Facebook’s report is the company’s history of earnings surprises and the effect that these surprises have had on share prices.
Facebook, Inc. Price, Consensus and EPS Surprise
Facebook, Inc. Price, Consensus and EPS Surprise | Facebook, Inc. Quote
As we can see, Facebook has garnered a strong earnings surprise streak. The company has successfully met or surpassed earnings estimates in nine-consecutive quarters. However, a positive earnings surprise has not always resulted in an immediate surge in share prices.
Facebook investors should also expect the stock to move based on anything that the company might say about guidance or its aforementioned plans to spend more on security. Another thing to remember is that most tech firms have been taking one-time charges related to the recent U.S. tax reform bill. These charges have led to major differences between adjusted and GAAP earnings figures, but they have also inspired favorable forward-looking earnings guidance.
Want more analysis from this author? Make sure to follow @Ryan_McQueeneyon Twitter!
Don’t Even Think About Buying Bitcoin Until You Read This
The most popular cryptocurrency skyrocketed last year, giving some investors the chance to bank 20X returns or even more. Those gains, however, came with serious volatility and risk. Bitcoin sank 25% or more 3 times in 2017.
Zacks’ has just released a new Special Report to help readers capitalize on the explosive profit potential of Bitcoin and the other cryptocurrencies with significantly less volatility than buying them directly.
See 4 crypto-related stocks now >>