For Immediate Release
Chicago, IL –July 26, 2017 –Zacks Equity Research highlights Facebook (NASDAQ: (FB - Free Report) – Free Report) as the Bull of the Day Valeant Pharmaceuticals (NYSE: (VRX - Free Report) – Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Advanced Micro Devices, Inc. (NASDAQ: (AMD - Free Report) – Free Report) .
Here is a synopsis of all five stocks:
Bull of the Day :
Facebook ( NASDAQ: (FB - Free Report) – Free Report) reports Q2 earnings today after the close and any investor who gets excited about advertising sales growth of 45% year-over-year, and 15% sequentially, should read this article and get ready to buy FB shares on any dip.
Points on Why It's All About the Ecosystem
1) Consensus Projections & Raised Estimates
Facebook is expected to report just over $9 billion in ad revenues for the quarter and $1.13 EPS, representing 49% profit growth. Since the company will be evaluated on many other growth metrics besides the top and bottom lines, my last point will briefly address the "What if they miss?" question.
What's been fascinating for me to watch as a Facebook bull in the face of so many who doubt the ad growth can continue is how estimates have just kept moving higher all year. In January, we started out with the consensus for full-year 2017 revenues projected to be under $36 billion in ad sales (fully 98% of total revs), or 32% growth.
In the past few weeks, as analysts have done more channel checks, the numbers have climbed to just over $38 billion in advertising revenues for over 40% top line growth. And the 2018 estimates keep getting bumped too with revenues to hit over $49 billion and EPS of $6, representing 28% and 24% growth.
2) Ad Inventory Shrinking?
Part of the doubt about how Facebook could continue to grow ad sales as such a clip was that even they warned about reaching capacity on the News Feed for ads. But this is clearly the right side of the supply and demand curve to be on.
As Facebook COO Sheryl Sandberg said last quarter, they diligently track the impact of "ad loads" on the user experience, going for quality and relevance over quantity and annoyance (my paraphrase).
The key has been to innovate and execute on a plan to shift more advertising to Instagram where social audience targeting can be just as effective as on the core FB feeds.
3) Instagram Leapfrogs Snapchat
Instagram hit 700 million total users and 400 million DAUs (daily active users) as of Facebook's last quarterly report May 3. The real growth has come from Instagram Stories which has greatly surpassed that of rival they copied, Snapchat.
Stories passed 250 million DAUs in June, up from 200 million in April, 150 million in January, and 100 million in October -- only two months after launch.
While the company is taking their time to monetize Instagram, we could see a dramatic shift forward in those efforts in Q2. They might even begin to break-out Instagram revenue as a segment. Until then, analysts estimate the photo-sharing app could generate over $4 billion, or 10%+, to Facebook's top line.
Valeant Pharmaceuticals (NYSE: (VRX - Free Report) – Free Report) shares have more than doubled since late April as much of the pessimism that was priced into the beleaguered medical empire was likely over-done near $10.
Obviously, with projected EPS this year of over $3.50, the stock appears to be a terrific bargain, even today near $18 and under 5X.
But VRX is still getting put in the cellar of the Zacks Rank because estimates were reduced recently by 2 analysts. And consistent with the longer-term evaporation of the franchise, next year's projections are only registering 0.66% top line growth and 4.4% on the bottom.
The earnings picture could turn around for VRX at any time, but right now analysts are not that optimistic.
Valeant is in the middle of a large debt reduction program. While it sells non-core assets, there is probably more uncertainty about the timing of a lasting sales and profit turnaround.
For instance, just last week Valeant announced an agreement to sell its Obagi Medical Products business for $190 million in cash to Haitong International Zhonghua Finance Corporation. The $190 million sale price is over 55% below the $437 million VRX paid for Obagi in April 2013.
Some investment bank analysts see more uncertainty ahead. They cite still-high leverage and believe that recent deals, including divestitures of iNova and Dendreon, have had limited impacts on the overall leverage situation.
Until the estimates start going back up for next year, it may be time to shed VRX shares near this $18 resistance level while you can.
Strong Sales Help AMD Post Q2 Earnings, Revenue Beats
Advanced Micro Devices, Inc. ( NASDAQ: (AMD - Free Report) – Free Report) just released its second-quarter 2017 financial results, posting a GAAP loss of $0.02 per share and revenues of $1.22 billion. Currently, AMD is a Zacks Rank #3 (Hold) and is up 8.08% to $15.25 per share in after-hours trading shortly after its earnings report was released.
Beat earnings estimates . Adjusting for stock option expenses, the company posted a loss of one cent per share, beating the Zacks Consensus Estimate of a loss of one cent per share. On a GAAP basis, AMD reported a loss of two cents per share, and on a non-GAAP basis, the chipmaker posted a profit of two cents per share.
Beat revenue estimates . The company saw revenue figures of $1.22 billion, topping our consensus estimate of $1.15 billion.
The chipmaker’s quarterly revenue jumped 19% year-over-year and 24% sequentially, spurred by higher revenue figures from its computing and graphics sector. AMD reported operating income of $25 million, but a net loss of $16 million.
AMD’s computing and graphics segment revenue jumped 51% year-over-year to $659 million, which was helped demand for its Ryzen desktop processors.
AMD projects revenues to increase roughly 23% sequentially (plus or minus 3%) for the third-quarter. The company expects full-year revenue to jump “by a mid to high-teens %,” which is up from the company’s last guidance projections of low double-digit revenue growth.
“Our second quarter results demonstrate strong growth driven by leadership products and focused execution," AMD president and CEO Dr. Lisa Su said in a statement.
"Our Ryzen desktop processors, Vega GPUs, and EPYC datacenter products have received tremendous industry recognition. We are very pleased with our improved financial performance, including double digit revenue growth and year-over-year gross margin expansion on the strength of our new products.”
About the Bull and Bear of the Day
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