Why Face­book must crush its es­ti­mates

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

Face­book Inc. (NAS­DAQ: FB) is sched­uled to re­lease its most re­cent earn­ings re­port on Wed­nes­day. Thom­son Reuters has con­sen­sus es­ti­mates of $0.47 in earn­ings per share (EPS) on $3.98 bln in rev­enue. The same pe­riod in the pre­vi­ous year had $0.42 in EPS and rev­enue of $2.91 bln.

This in­cred­i­ble, fast-grow­ing com­pany re­mains the face of so­cial media and was the new­est ad­di­tion to the Mer­rill Lynch US 1 list. Face­book has been grind­ing higher over the past year af­ter a big run up in 2013 to early 2014, when the stock al­most dou­bled. And the so­cial m e d i a be­he­moth doesn’t look to be slow­ing down as an­a­lysts across Wall Street con­tinue to rec­om­mend the stock and have moved price tar­gets higher.

The Mer­rill Lynch team feels that, over­all, in­vestors will con­tinue to mi­grate to what they call “high-qual­ity” growth stocks, per­haps be­gin­ning to es­chew mo­men­tum dar­lings that are prob­a­bly way over­priced. The an­a­lysts point to the fact that Face­book has easy sec­ond-quar­ter com­par­isons to last year for this quar­ter and through the rest of 2015.

It has been no se­cret that Face­book has been a me­te­oric rise. For a se­ri­ous growth story and with its dom­i­nant po­si­tion in so­cial media set, it is not even deemed overly ex­pen­sive by se­ri­ous growth stock in­vestor met­rics. Still, Face­book’s val­u­a­tion should start turn­ing heads here on a rel­a­tive ba­sis.

The driv­ing is­sue is not just that Face­book al­ready passed Wal-Mart in mar­ket cap. That is old news. Now Face­book has passed Gen­eral Elec­tric, and it even re­cently sur­passed JPMor­gan in mar­ket cap as well.

Face­book’s mar­ket cap is right around $272 bln, about $10 bln larger than the mar­ket cap of GE and about $15 bln higher than JPMor­gan. Face­book’s mar­ket cap is now about $40 bln larger than Wal­Mart’s.

A few an­a­lysts chimed Face­book ahead of earn­ings:

- Mor­gan Stan­ley re­it­er­ated a Buy rat­ing and raised its price tar­get to $110 from $94.

- Brean Cap­i­tal re­it­er­ated a Buy rat­ing with a $108 price tar­get.

- Op­pen­heimer re­it­er­ated a Buy rat­ing with a $100 price tar­get.

Shares of Face­book were up 1.7% at $97.05 on Fri­day af­ter­noon, within its 52-week trad­ing range of $70.32 to $99.24. The stock has a con­sen­sus an­a­lyst price tar­get of $99.23. (Source: 24/7 Wall St.com)

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