By: Brendan Gilmartin, VP Research & Content
Facebook (FB) is scheduled to report 2Q 2013 earnings after the close of trading on Wednesday, July 24. The actual results are expected to come through at approximately 4:05 p.m. EST with a conference call to follow at 5:00 p.m. This is Facebook's fifth earnings release since its IPO back in May, 2012 and could have a direct impact on Linked-In (LNKD) and online game-maker Zynga (ZNGA).
Outliers & Strategy
Facebook is expected to report Non-GAAP Earnings Per Share of $0.14 per share for the 2Q 2013 period. Estimates range from $0.10 to $0.18. (Source: Yahoo! Finance)
Revenues for the 2Q 2013 period are forecast to come in at $1.62 billion, the mid-point of analyst estimates of between $1.55 billion and $1.75 billion.
The options market is pricing in a 7.6% move off earnings when Facebook reports its results.
Facebook shares slipped 1.14% on Friday, July 19, a day after Google (GOOG) reported that 2Q 2013 Paid Clicks (clicks related to ads served on Google sites) increased a mere 4% over the preceding quarter. At the same time, Google's Average cost-per-click decreased approximately 2% over the same timeframe.
- 07/16: SunTrust initiated coverage on Facebook with a Buy rating and a $32 price target, according to a post on Benzinga.com. The positive view was based on the number of unique visitors each day and the potential for $7 bln in incremental revenue.
- 07/10: Citigroup started coverage on Facebook with a Neutral rating and a price target of $27.00, according to Benzinga.com. While the firm is upbeat on Facebook's large user base and data, there are several concerns, including monetization of mobile, competitive threats, and valuation.
- 06/26: JP Morgan reiterated an Overweight rating on Facebook with a price target of $35, according to Benzinga.com. The firm believes that the competitive threat against Facebook is minimal while mobile usage continues to increase.
- 06/21: UBS upgraded Facebook from Neutral to Buy and raised the price target from $28 to $30, according to a post on Barron's Online. The firm cited Facebook's monetization efforts, including video ads and expansion of Instagram, along with low valuation.
- 06/10: Stifel Nicolaus upgraded Facebook from Hold to Buy with a price target of $29.00, according to a report on StreetInsider.com. The firm noted that a decrease in users and ad efficacy are priced in at these levels, while the company stands to benefit from new products, monetization of Instagram, and possible inclusion in the S&P 500.
Facebook shares recently climbed back above the 200-Day SMA near $26.00 before stalling out near $27.00 resistance - a level going back to late February. Should earnings surprise to the upside, look for Facebook to make a run through $27.00, followed by $29.00. In the event of a downside surprise, Facebook is vulnerable to the 50-Day SMA near $25.00, followed by the June nadir near $23.00. (Chart courtesy of StockCharts.com)
Facebook shares have been inching higher over the past several weeks amid renewed optimism over ad spending, development of new products, modest valuation, and an expanding mobile presence. The knock against Facebook is its ability to scale in mobile, along with questions over its monetization plans, and concerns over decreasing subscriber growth. Against this backdrop, Facebook needs to deliver earnings and revenues toward the upper end of consensus views in order to assuage investor concerns over slower growth prospects.
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