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Should You Buy Facebook (FB) Stock Ahead of Q4 Earnings?
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At this point, Facebook’s 2018 struggles have become well known to many outside of the investment world as governments from the U.S. to Europe came down on the social media company for its user data policies. Shares of Facebook are still down over 30% in the last six months despite its post-Christmas rally.
So, let’s see if investors should think about buying Facebook stock ahead of its Q4 earnings results that are due out Wednesday, January 30.
Overview & Outlook
Facebook stock plummeted in July 2018 after it had climbed back following its Cambridge Analytica scandal. Stories and worries have continued since last spring. But Facebook is not alone in some of the backlash it has delt with regarding its outsized control over the spread of information, with the likes of Google (GOOGL - Free Report) and Twitter facing similar challenges.
With that said, most investors likely ran away from FB stock because it committed billions of dollars to clean up and safeguard its platform, which it said will likely cause its operating margin to fall into the “mid-30s on a percentage basis” over a more than two-year period. FB’s operating margin sunk to 42% last quarter down from 50% in the third quarter of 2017.
Despite many legitimate worries about the platform, Facebook is poised to remain a digital advertising juggernaut, especially as non-ad supported streaming platforms from Netflix (NFLX - Free Report) , Amazon (AMZN - Free Report) , and soon enough Disney (DIS - Free Report) and Apple (AAPL - Free Report) expand their share of the entertainment market. Plus, Facebook is growing its live streaming video offerings and its Stories feature has grown hugely popular with advertisers.
Shares of Facebook rested at $144.30 through mid-afternoon trading Thursday, which marks a 32% downturn from FB’s 52-week high of $218.62 per share.
Q4 Estimates
Moving on, Facebook’s fourth-quarter revenues are projected to jump 26.2% from the year-ago period to reach $16.37 billion, based on our current Zacks Consensus Estimate. This would come on top of the year-ago quarter’s 47% revenue surge, but mark a significant downturn from Q3’s 33% top-line expansion, Q2’s 42% climb, and Q1’s 49% jump.
Peeking further ahead, FB’s fiscal 2019 revenues are expected to climb 23.4% to touch $68.25 billion. On the bottom end of the income statement, FB’s adjusted Q4 earnings are expected to dip 1.36% to $2.17 a share. The social media firm’s fiscal 2018 earnings are still expected to jump 19.6%.
However, Facebook’s adjusted fiscal 2019 earnings are expected to come in roughly flat compared to 2018 as it spends more than ever before. With that said, investors should note that Facebook carries no short or long-term debt at the moment, which should come in handy during this stretch.
User Growth
Along with Facebook’s top and bottom lines, Wall Street will pay close attention to Facebook’s user total as its size and market saturation makes growth harder to achieve, especially in its most important markets. Our current NFM estimates call for Facebook’s monthly active user total in the U.S. & Canada—which accounted for 49% of Q3 revenues—to pop roughly 1.6% to hit 242.93 million.
FB’s European MAUs are projected to climb 2.4% from the year-ago period to 378.79 million. This would also mark a sequential increase from Q3’s 375 million and could help Facebook stock after three straight quarters of sequential declines in the region that accounted for 24% of revenues last quarter.
Bottom Line
Mark Zuckerberg and his company are likely to remain the subjects of stories, but user data and privacy worries will soon be a much broader societal issue. Facebook is also projected to see its global MAU totals jump approximately 9.4% from 2.13 billion in Q4 2017 to reach 2.33 billion, driven by growth in both the Asia-Pacific and “Rest of World” regions. Our NFM projection would see the social media firm nearly match last quarter’s 9.6% climb to help dispel any worries that users have fled the platform.
We should note that Facebook’s user totals don’t currently include Instagram, WhatsApp, or Oculus users “unless they would otherwise qualify.” It is, however, not very likely that there is a significant discrepancy, or why wouldn’t Facebook share the good news?
Facebook is Zacks Rank #3 (Hold) at the moment that sports an “A” grade for Momentum and a “B” for Growth in our Style Scores system. Clearly, it is up to every investor to decide if now is a good time to buy FB stock, but it does seem hard to believe Facebook won’t at least return to its previous highs at some point, based solely on its user metrics and control of the digital ad market.
Facebook is scheduled to release its Q4 financial results after the closing bell on Wednesday, January 30.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.
Image: Bigstock
Should You Buy Facebook (FB) Stock Ahead of Q4 Earnings?
At this point, Facebook’s 2018 struggles have become well known to many outside of the investment world as governments from the U.S. to Europe came down on the social media company for its user data policies. Shares of Facebook are still down over 30% in the last six months despite its post-Christmas rally.
So, let’s see if investors should think about buying Facebook stock ahead of its Q4 earnings results that are due out Wednesday, January 30.
Overview & Outlook
Facebook stock plummeted in July 2018 after it had climbed back following its Cambridge Analytica scandal. Stories and worries have continued since last spring. But Facebook is not alone in some of the backlash it has delt with regarding its outsized control over the spread of information, with the likes of Google (GOOGL - Free Report) and Twitter facing similar challenges.
With that said, most investors likely ran away from FB stock because it committed billions of dollars to clean up and safeguard its platform, which it said will likely cause its operating margin to fall into the “mid-30s on a percentage basis” over a more than two-year period. FB’s operating margin sunk to 42% last quarter down from 50% in the third quarter of 2017.
Despite many legitimate worries about the platform, Facebook is poised to remain a digital advertising juggernaut, especially as non-ad supported streaming platforms from Netflix (NFLX - Free Report) , Amazon (AMZN - Free Report) , and soon enough Disney (DIS - Free Report) and Apple (AAPL - Free Report) expand their share of the entertainment market. Plus, Facebook is growing its live streaming video offerings and its Stories feature has grown hugely popular with advertisers.
Shares of Facebook rested at $144.30 through mid-afternoon trading Thursday, which marks a 32% downturn from FB’s 52-week high of $218.62 per share.
Q4 Estimates
Moving on, Facebook’s fourth-quarter revenues are projected to jump 26.2% from the year-ago period to reach $16.37 billion, based on our current Zacks Consensus Estimate. This would come on top of the year-ago quarter’s 47% revenue surge, but mark a significant downturn from Q3’s 33% top-line expansion, Q2’s 42% climb, and Q1’s 49% jump.
Peeking further ahead, FB’s fiscal 2019 revenues are expected to climb 23.4% to touch $68.25 billion. On the bottom end of the income statement, FB’s adjusted Q4 earnings are expected to dip 1.36% to $2.17 a share. The social media firm’s fiscal 2018 earnings are still expected to jump 19.6%.
However, Facebook’s adjusted fiscal 2019 earnings are expected to come in roughly flat compared to 2018 as it spends more than ever before. With that said, investors should note that Facebook carries no short or long-term debt at the moment, which should come in handy during this stretch.
User Growth
Along with Facebook’s top and bottom lines, Wall Street will pay close attention to Facebook’s user total as its size and market saturation makes growth harder to achieve, especially in its most important markets. Our current NFM estimates call for Facebook’s monthly active user total in the U.S. & Canada—which accounted for 49% of Q3 revenues—to pop roughly 1.6% to hit 242.93 million.
FB’s European MAUs are projected to climb 2.4% from the year-ago period to 378.79 million. This would also mark a sequential increase from Q3’s 375 million and could help Facebook stock after three straight quarters of sequential declines in the region that accounted for 24% of revenues last quarter.
Bottom Line
Mark Zuckerberg and his company are likely to remain the subjects of stories, but user data and privacy worries will soon be a much broader societal issue. Facebook is also projected to see its global MAU totals jump approximately 9.4% from 2.13 billion in Q4 2017 to reach 2.33 billion, driven by growth in both the Asia-Pacific and “Rest of World” regions. Our NFM projection would see the social media firm nearly match last quarter’s 9.6% climb to help dispel any worries that users have fled the platform.
We should note that Facebook’s user totals don’t currently include Instagram, WhatsApp, or Oculus users “unless they would otherwise qualify.” It is, however, not very likely that there is a significant discrepancy, or why wouldn’t Facebook share the good news?
Facebook is Zacks Rank #3 (Hold) at the moment that sports an “A” grade for Momentum and a “B” for Growth in our Style Scores system. Clearly, it is up to every investor to decide if now is a good time to buy FB stock, but it does seem hard to believe Facebook won’t at least return to its previous highs at some point, based solely on its user metrics and control of the digital ad market.
Facebook is scheduled to release its Q4 financial results after the closing bell on Wednesday, January 30.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.
Click here for the 6 trades >>