The revenue of Facebook Inc (NASDAQ:FB) for the second quarter of the current fiscal year is expected to be in line or slightly better than the $1.61 billion consensus estimate, according to analysts at Deutsche Bank Market Research.
The analysts believe that risk/reward for the social network giant is compelling as it heads toward its second quarter earnings result citing an 11x 2014 EBITDA versus the mid 30% EBITDA growth rate.
Facebook Share Could Remain Mid-High
Equity research analysts Ross Sandler and Lloyd Walmsley said that shares of Facebook Inc (NASDAQ:FB) could remain in the mid-high $20 range until its earnings results in October when the social network giant resolves the “growing through the tougher comps.”
Sandler and Walmsley noted that the advertising revenue of Facebook Inc (NASDAQ:FB) is slightly upbeat compared with its ad revenue in the previous quarter. According to the analysts, the momentum is driven by its performance overseas. They also speculated that the social network giant’s might also record a bit higher ad revenue in the United States.
In a note to investors, the analysts wrote, “We’ve heard from brands that sell-through from news feed is increasing in 2Q (both mobile and desktop), which comes in at much higher eCPM for FB vs. right rail, hence small increases in sell-through can be meaningful for revenue.”
Expectations for Monetization of Instagram
Sandler and Walmsley do not expect Facebook Inc (NASDAQ:FB) to report Instagram monetization in 2013. However, they believe that it remains as a pending catalyst to the shares of the social network giant.
The analysts also believe that Facebook Inc (NASDAQ:FB) will continue to accelerate its mobile app portfolio in the second quarter, and estimated that the amount could reach as much as $100 million per quarter. Sandler and Walmsley are expecting the social network giant to achieve around $1.4 billion in ad revenue including a flat desktop growth, $435 million mobile in mobile (both conservative) and $219 million in payments.
In addition, the analysts expect Facebook Inc (NASDAQ:FB) to achieve an EBITDA of $812 million or 50.4 percent margin, down 500 bps y/y. Their EPS estimate for the social network giant at $0.12 is lower than the $0.14 consensus estimate based on their projected conservative margin.
The analysts recommended a Buy rating for shares of Facebook Inc (NASDAQ:FB) with a $37 price target based on 20x 2014 EBITDA.