Why Facebook must crush its estimates
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)