Facebook Inc (FB) Earnings Preview: Eyes On Mobile Monetization

Facebook Inc (FB) Earnings Preview: Eyes On Mobile Monetization

Facebook Inc (NASDAQ:FB) will report its 2012 fourth quarter results on Friday, January 30. The company has received bullish estimates from analysts and is expected to rally back to profitability following two quarters of losses. Facebook has not been profitable since going public in May 18, 2012.

Facebook Inc (FB) Earnings Preview: Eyes On Mobile Monetization

However, according to reports, the social media giant is about to break this jinx and report a GAAP income of about $270 million. Facebook Inc (NASDAQ:FB) has made milestone developments in its bid to monetize its mobile platform, with great signs exhibited in 3Q12 results.

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In a note sent to investors by Credit Suisse Group AG (NYSE:CS) titled “Expecting Mobile Benefit Without Incremental Desktop Decline”, research analysts, Stephen Ju, Dean Prissman, Philip Boyer, and Genna Sankin updated their estimates for Facebook Q4 results, and raised the price target from $24 to $31. The analysts remained Neutral on the stock.

According to reports, Facebook is expected to report an upside in Mobile Monetization as it looks to top up last quarter’s achievement.

In the report, the analysts wrote, “We have updated our model and raised our top and bottom line estimates for Facebook following channel checks as well as refinements to credit the company with incremental mobile monetization”.

“While we maintain our positive bias on FB with the company set to capitalize on the continued movement of brand advertising budgets online, with shares already reflecting what we believe are near-to-medium term benefits of both mobile monetization as well as FBX, we maintain our Neutral rating for now,” the analysts added.

The analysts raised the advertising revenue for Q4 by 15 percent to $1.40 billion, which includes $335 million in Mobile revenue. The analysts also raised their prospects for advertising revenue for FY13 and FY14 by 13 percent and 12 percent respectively. They now expect the social networking giant to generate approximately $1.85 billion and $2.95 billion respectively, worth of advertising revenue.

The analysts also revised their valuation model for the company using the sum of parts basis, to discounted cash flows in coming up with the price target. The analysts wrote, “we have moved to a straightforward DCF-based valuation more in-line with the rest of our coverage universe, using a 10.5 percent weighted average cost of capital and a 3 percent terminal growth rate. On the back of our estimates changes, we raise our target price from $24 to $31”.

Facebook Inc (NASDAQ:FB) is currently trading at $31.33.

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