Shares of Facebook Inc (NASDAQ:FB) are down $1.36, or 1.04%, at $129.63 despite a report this morning from MKM Partners’ Rob Sanderson stating that he expects the company’ s Q316 results to beat expectations. The analyst, who has a $165 price target and a ‘Buy’ rating on the name, predicts FB shares will probably rally in the wake of the results. In addition to MKM Partners, Cantor Fitzgerald’s Youssef Squali also said he sees a good quarter ahead.
“Our channel checks show very healthy ad demand for Social inventory, with Merkle [a leading marketing partner for Facebook and Google] pegging growth in ad spend on Facebook at +63% Y/Y in 3Q16, while Kenshoo pegs it at +45%”, the analyst wrote in a note to investors, adding he attributes part of his optimism about Facebook’s upcoming Q3 report to Alphabet’s (NASDAQ:GOOGL) third-quarter earnings last week.
Squali reiterated Facebook stock a ‘Buy’ while leaving his 12-month price target unchanged to $160.
All eyes will be on Facebook Inc after today’s close. Wall Street analysts are on average expecting the social networking giant to post $6.9 billion in sales for the fiscal quarter ending Sept. 2016. This would show a 7.14% increase from the Q216 revenue of $6.44 billion as well as an increase of 53.33% from the same period in Q315. EPS in Q316 are expected to come in at $0.97, a growth rate of 70.18% from $0.57 per share a year earlier. Meanwhile, EarningsWhisper.com reports a whisper number of $1.03 per share.
It should be noted that besides user engagement, which is another aspect investors will watch very closely, if Menlo Park delivers those results, the company will print the fourth straight quarter in which has expanded sales by more than 50% on a year-over-year basis. Investors are banking on Facebook’s management to continue growing its net income through new ad products and overseas margin expansion. In Q216 FB’s profit jumped by more than 185% y/y to over $2 billion.
While investors should know that long-term this growth is simply not sustainable, the fact is that among the world’s top five tech companies by market value, currently none comes close to this level of revenue growth. Additionally, with revenue growth already soaring, Facebook’s bottom line will also continue to benefit on the potential for monetization of Oculus, WhatsApp and the Facebook Messenger platforms.
Facebook Stock Action
Facebook stock closed Tuesday at $129 per share. In the past 52 weeks, shares of the social network have traded between a low of $89.37 and a high of $133.50, with the name’s 50-day moving average [MA] and 200-day MA located at $129.22 and $121.75 levels, respectively.
On trading measures, the $371.4 billion market cap company has a median Street price target of $160 with a high target of $185. Of 41 analysts covering the stock, 36 rate it a ‘Buy’ versus five rating it a ‘Hold’. No analyst rates the equity a ‘Sell’.
Facebook stock currently prints a one year return of about 29%, and a year-to-date return of around 25%.