An­a­lyst sees large up­side in Face­book ahead of earn­ings

Financial Mirror (Cyprus) - - FRONT PAGE - By Chris Lange

Face­book, Inc. (NAS­DAQ: FB) will re­port its first-quar­ter re­sults Wed­nes­day af­ter the mar­ket close. Thom­son Reuters has con­sen­sus es­ti­mates of $0.40 in EPS on $3.56 bln in rev­enue. The same pe­riod from the pre­vi­ous year had $0.34 in EPS on $2.50 bln.

Just a cou­ple of days be­fore Face­book re­ports earn­ings, Op­pen­heimer re­leased a re­port say­ing that it ex­pects strong first quar­ter re­sults, driven by higher mo­bile en­gage­ment and strong mon­eti­sa­tion. The firm fore­casts cur­rency hurt­ing the first and sec­ond quar­ter rev­enues by 7% and 9% ver­sus 5% pre­vi­ously. Street es­ti­mates ap­pear con­ser­va­tive for ex­pense growth, as the 2014 fourth quar­ter’s head­count in­creased “only” 45% com­pared to a 55% es­ti­mate for the first quar­ter. Op­pen­heimer main­tained an Out­per­form rat­ing and set $100 as its price tar­get, im­ply­ing an up­side of nearly 21% from cur­rent prices.

Op­pen­heimer’s chan­nel checks sug­gested that so­cial ad bud­gets were flat­tish se­quen­tially ver­sus a mid-sin­gle digit quar­ter-over-quar­ter decline last year. Cur­rently au­di­ence tar­get­ing is bet­ter iden­ti­fy­ing “in­tended im­pres­sions,” driv­ing mean­ing­fully higher click-through rates. Mean­while, Face­book is gain­ing a higher mar­ket share of the mo­bile In­ter­net and at the same time its in­crease in ad­ver­tis­ers sug­gests that there are more im­pres­sions at higher rates. The firm be­lieves that Face­book shares have lagged since fourth quar­ter earn­ings due to the com­pany’s 50% to 65% year over year guid­ance for ex­pense growth. While the first quar­ter rev­enue/EBITDA is in line with the Street (with non-GAAP ex­pense of +55% year over year), this could prove overly con­ser­va­tive given FX and fourth quar­ter head­count (+45% year over year).

The Street is fore­cast­ing slow­ing ad rev­enue through the year, even with new ad prod­ucts be­ing rolled out. The Face­book Au­di­ence Net­work glob­ally in the fourth quar­ter.

A few other firms took the chance to weigh in on Face­book ahead of its earn­ings: SunTrust had a Buy rat­ing and set its price tar­get at $90; Brean Cap­i­tal re­it­er­ated a Buy rat­ing and set its price tar­get at $96; Cit­i­group had a Buy rat­ing and moved its price tar­get up to $97 from $91.

Shares of Face­book were up 2.4% at $82.74 on Mon­day. The stock has a con­sen­sus an­a­lyst price tar­get of $92.77.





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