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Facebook is poised for the biggest drop ever in today’s trading session after its dismal Q2 results. The company broke its long streak of earnings and revenue beat as well as warned of a slowdown in revenue growth.
What Happened?
Facebook missed the Zacks Consensus Estimate for earnings the first time in nine quarters and revenues in 13 quarters. Adjusted earnings per share came in at $1.74, a penny below the Zacks Consensus Estimate but up 32% from the year-ago earnings. Revenues soared 42% year over year to $13.2 billion but fell short of the estimated $13.42 billion. Both earnings and revenue growth slowed from year-over-year growth of 63% and 49%, respectively, recorded in Q1.
User growth also slowed from the prior quarter. Both daily and monthly active users grew 11% year over year to 1.47 billion and 2.23 billion, respectively, compared with 13% growth seen in Q1.
Chief Financial Officer David Wehner warned of continued deceleration in revenue growth in the second half of the year. He expects revenue growth rates to decline by high single-digit percentages sequentially in both the third and fourth quarters.
As Facebook will continue to invest heavily in security and abuse prevention, video content, and long-term initiatives, which center on augmented and virtual reality, artificial intelligence and connectivity, expense would increase faster than revenues. As such, the company continues to expect operating expenses to increase 50-60% this year, higher than 32% recorded in 2017. This would have a significant impact on the company's profitability.
Given this, the social media giant erased about $130 billion in its market cap value after-market hours on Wednesday, following its results. Shares of FB were down 20% at the close after tanking as much as 24% during the evening session. Should the same sluggish trend continue in today’s trading session, the stock could slip into the red for the year and enter a bear market (a drop of 20% from the latest peak).
The malaise also spread to the broad technology sector, with tech-heavy Nasdaq Composite Index futures losing nearly 1% in after-hour trade. Other FANG stocks — Amazon (AMZN - Free Report) , Netflix (NFLX - Free Report) and Alphabet (GOOGL - Free Report) — saw a sharp sell-off of 2.3%, 3% and 2.4%, respectively. Microsoft (MSFT - Free Report) and Apple (AAPL - Free Report) slid 1% while Twitter tumbled 6%.
A Good Buy Point?
Facebook currently carries a Zacks Rank #3 (Hold) and a Value Score of D, a combination that seems unattractive for investment purpose. Our research shows that stocks with a Value Score of A or B, when combined with a Zacks Rank #1 (Strong Buy) or 2 (Buy), offer the best upside potential. In addition, as the tech sector is expected to see rough trading, the beaten down prices could provide a great opportunity to cash in. You can see the complete list of today’s Zacks #1 Rank stocks here.
With the help of our Zacks Stock Screener, we have screened tech stocks with market capitalization of more than $10 billion, a Zacks Rank #1 or 2, and a Value Score of A or B. Then, we added the extra flavor of positive estimated earnings growth rate for the current fiscal year to ensure some growth prospect.
Here are our five picks that are much better than Facebook with superior methodologies:
Apple Inc. (AAPL - Free Report) is engaged in designing, manufacturing and marketing mobile communication and media devices, personal computers, and portable digital music players. The stock has an estimated earnings growth rate of 24.00% for this fiscal (ending September 2019). It has a Zacks Rank #2 and a Value Score of B.
Micron Technology Inc. (MU - Free Report) is one of the leading worldwide providers of semiconductor memory solutions. It has an expected growth rate of 136.29% for fiscal (ending August 2018). The stock has a Zacks Rank #1 and a Value Score of A.
HP Inc. (HPQ - Free Report) provides products, technologies, software, solutions, and services to individual consumers, small- and medium-sized businesses, and large enterprises, including customers in the government, health, and education sectors worldwide. The company is expected to see massive earnings growth of 21.21% for the fiscal year (ending October 2018). HPQ has a Zacks Rank #2 and a Value Score of A.
Cisco Systems Inc. (CSCO - Free Report) designs, manufactures and sells Internet Protocol (IP) based networking and other products related to the communications and information technology industry worldwide. The stock has an estimated earnings growth rate of 11.52% for the fiscal (ending July 2019). It has a Zacks Rank #2 and a Value Score of B.
Analog Devices Inc. (ADI - Free Report) is a world leader in the design, manufacture and marketing of a broad portfolio of high performance analog, mixed-signal, and digital signal processing (DSP) integrated circuits (ICs) used in virtually all types of electronic equipment. The stock is expected to generate earnings growth of 22.88% for fiscal year (ending October 2018). It has a Zacks Rank #2 and a Value Score of B.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
Image: Bigstock
Facebook's Dismal Q2 Hits Tech Rally: 5 Big, Top-Ranked Picks
Facebook is poised for the biggest drop ever in today’s trading session after its dismal Q2 results. The company broke its long streak of earnings and revenue beat as well as warned of a slowdown in revenue growth.
What Happened?
Facebook missed the Zacks Consensus Estimate for earnings the first time in nine quarters and revenues in 13 quarters. Adjusted earnings per share came in at $1.74, a penny below the Zacks Consensus Estimate but up 32% from the year-ago earnings. Revenues soared 42% year over year to $13.2 billion but fell short of the estimated $13.42 billion. Both earnings and revenue growth slowed from year-over-year growth of 63% and 49%, respectively, recorded in Q1.
User growth also slowed from the prior quarter. Both daily and monthly active users grew 11% year over year to 1.47 billion and 2.23 billion, respectively, compared with 13% growth seen in Q1.
Chief Financial Officer David Wehner warned of continued deceleration in revenue growth in the second half of the year. He expects revenue growth rates to decline by high single-digit percentages sequentially in both the third and fourth quarters.
As Facebook will continue to invest heavily in security and abuse prevention, video content, and long-term initiatives, which center on augmented and virtual reality, artificial intelligence and connectivity, expense would increase faster than revenues. As such, the company continues to expect operating expenses to increase 50-60% this year, higher than 32% recorded in 2017. This would have a significant impact on the company's profitability.
Given this, the social media giant erased about $130 billion in its market cap value after-market hours on Wednesday, following its results. Shares of FB were down 20% at the close after tanking as much as 24% during the evening session. Should the same sluggish trend continue in today’s trading session, the stock could slip into the red for the year and enter a bear market (a drop of 20% from the latest peak).
The malaise also spread to the broad technology sector, with tech-heavy Nasdaq Composite Index futures losing nearly 1% in after-hour trade. Other FANG stocks — Amazon (AMZN - Free Report) , Netflix (NFLX - Free Report) and Alphabet (GOOGL - Free Report) — saw a sharp sell-off of 2.3%, 3% and 2.4%, respectively. Microsoft (MSFT - Free Report) and Apple (AAPL - Free Report) slid 1% while Twitter tumbled 6%.
A Good Buy Point?
Facebook currently carries a Zacks Rank #3 (Hold) and a Value Score of D, a combination that seems unattractive for investment purpose. Our research shows that stocks with a Value Score of A or B, when combined with a Zacks Rank #1 (Strong Buy) or 2 (Buy), offer the best upside potential. In addition, as the tech sector is expected to see rough trading, the beaten down prices could provide a great opportunity to cash in. You can see the complete list of today’s Zacks #1 Rank stocks here.
With the help of our Zacks Stock Screener, we have screened tech stocks with market capitalization of more than $10 billion, a Zacks Rank #1 or 2, and a Value Score of A or B. Then, we added the extra flavor of positive estimated earnings growth rate for the current fiscal year to ensure some growth prospect.
Here are our five picks that are much better than Facebook with superior methodologies:
Apple Inc. (AAPL - Free Report) is engaged in designing, manufacturing and marketing mobile communication and media devices, personal computers, and portable digital music players. The stock has an estimated earnings growth rate of 24.00% for this fiscal (ending September 2019). It has a Zacks Rank #2 and a Value Score of B.
Micron Technology Inc. (MU - Free Report) is one of the leading worldwide providers of semiconductor memory solutions. It has an expected growth rate of 136.29% for fiscal (ending August 2018). The stock has a Zacks Rank #1 and a Value Score of A.
HP Inc. (HPQ - Free Report) provides products, technologies, software, solutions, and services to individual consumers, small- and medium-sized businesses, and large enterprises, including customers in the government, health, and education sectors worldwide. The company is expected to see massive earnings growth of 21.21% for the fiscal year (ending October 2018). HPQ has a Zacks Rank #2 and a Value Score of A.
Cisco Systems Inc. (CSCO - Free Report) designs, manufactures and sells Internet Protocol (IP) based networking and other products related to the communications and information technology industry worldwide. The stock has an estimated earnings growth rate of 11.52% for the fiscal (ending July 2019). It has a Zacks Rank #2 and a Value Score of B.
Analog Devices Inc. (ADI - Free Report) is a world leader in the design, manufacture and marketing of a broad portfolio of high performance analog, mixed-signal, and digital signal processing (DSP) integrated circuits (ICs) used in virtually all types of electronic equipment. The stock is expected to generate earnings growth of 22.88% for fiscal year (ending October 2018). It has a Zacks Rank #2 and a Value Score of B.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>