By Brendan Gilmartin
Facebook (FB) is scheduled to report Q4 2012 earnings after the close of trading on Wednesday, Jan. 30. The actual results are expected to come through at approximately 4:05 p.m. ET, with a conference call to follow at 5:00. This is Facebook's third earnings release since its IPO last May and could have a direct impact on LinkedIn (LNKD) and online game maker Zynga (ZNGA).
Outliers and Strategy
- Facebook is expected to report non-GAAP EPS of $0.15 per share for the Q4 2012 period. Estimates range from $0.12 to $0.19 (source: Yahoo Finance).
- Revenues for the Q4 2012 period are forecast to come in at $1.53 billion, the midpoint of analyst estimates of between $1.41 billion and $1.70 billion.
- Last quarter, Facebook shares advanced after non-GAAP EPS of $0.12 was slightly above consensus, while revenues of $1.262 billion were nearly 3% above consensus.
- Jan. 28: Raymond James upgraded Facebook from Market Perform to Outperform, with a price target of $38, according to a post on Barron's Online. The firm sees Facebook posting non-GAAP EPS of $0.18 on revenue of $1.57 billion, comfortably ahead of consensus views, based on steps to monetize mobile use, a strong pickup in ad spending, and growth in international markets with Japan, Brazil, and Europe showing promise. The firm also raised estimates for FY 2013.
- Jan. 22: Following a positive report on comScore.com, Oppenheimer reiterated an Outperform rating and $34 price target on Facebook, according to Barron's Online. The positive view is based on the positive trends in mobile. Similarly, Cantor Fitzgerald reiterated a Buy rating and a $33 price target, as the company widened its lead in the mobile space.
- Jan. 22: According to a blog post on comScore.com, Facebook finished ahead of Google Maps as the No. 1 U.S. mobile app in 2012. The same report showed Facebook had 23% of the overall mobile apps by share of U.S. time spent, implying the company's mobile strategy is bearing fruit.
- Jan. 15: Facebook unveiled its "Graph Search," allowing users to establish new connections through dynamic search features on content that's been shared through the platform.
- Jan. 4: Goldman Sachs reiterated a Buy rating and $35 price target on Facebook, citing monetization opportunities, according to a report on Barron's Online. In particular, the firm cited Facebook's new "Gifts" feature.
Facebook is up a staggering 60% from the mid-November lows. After bumping up against the overbought 70-level, the Relative Strength Index receded ahead of earnings, while the MACD is also signaling a pause in the momentum. Should earnings disappoint, look for support near the 20-day SMA at $30.00, with downside risk to the 50-day SMA near $28.00. Conversely, the recent highs near $32.50 are the first point of resistance, with room to run toward $35.00 and beyond if the earnings significantly top consensus views.
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It's been a wild quarter for Facebook, with the shares climbing back toward the IPO price from last May amid renewed optimism over the company's mobile strategy, its position as one of the most widely used smartphone apps, increased efforts to monetize the platform, and increased investment in areas such as the "Graph Search." An improving macroeconomic backdrop is also fueling growth in Facebook, with increased ad spending in North America, positive adoption of the "Gifts" feature, and international expansion. Against this favorable backdrop, look for Facebook to deliver results at the upper end of the Street guidance for investors to continue to "like" the shares.
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