Social network giant Facebook Inc (NASDAQ:FB) is expected to release its first quarter earnings results on Wednesday, May 1, 2013. Analysts at Wedbush Equity Research believe the company will report strong financial results due to strong growth in advertisements and cost control.
Wedbush analysts Michael Pachter together with Nick Mackay and Yoni Yadgaran maintained their ‘outperform’ rating and 12-month price target of $35 for shares of Facebook Inc (NASDAQ:FB). According them, the price target reflects a value of $60 per MAU of the social network giant’s peak MAU level with a conservative monetization assumption of $1 per MAU per month for five years.
Pachter and his colleagues projected that Facebook Inc (NASDAQ:FB)’s financial performance for the first quarter could meet or beat the consensus estimate of Wall Street analysts. The research firm cited that its current estimates for the social network giant are $1.43 billion revenue and $0.10 per share. The consensus estimates of analysts were at $1.44 billion revenue and $0.12 earnings per share.
According to the analysts, the social network giant’s top line growth will be driven by mobile ad revenue, an increase of 100 percent quarter-over-quarter of more than $300 million from the fourth quarter. In addition, they projected that several ad initiatives such as Custom Audiences and Facebook Ad Exchange (FBX) also serve as contributors to Facebook Inc (NASDAQ:FB)’s top line growth.
Pacther and his fellow analysts noted that since the launching of Facebook Ad Exchange, the social network giant served almost 1 billion impressions from 1,300 advertisers per day by December.
They anticipated that Facebook Inc (NASDAQ:FB) EPS growth will be driven by operating expense below the levels indicated by the management of the company. During the fourth quarter earnings conference call, the company warned investors that its operating expenses will increase by approximately 50 percent for the current fiscal year. However, Wedbush analysts believe that Facebook’s opex is below its guidance, citing that the company has more control over expenses than revenues.
The analysts said, “By providing such high level guidance, management provides itself with flexibility to still deliver a positive earnings result through opex control even if revenue lags expectations.”
In addition, Wedbush analysts believe that Facebook Home will drive the company’s engagement and top line growth. They emphasized that Home could be attractive to high-volume users, with the possibility that it would provide significant revenue from ads delivered in cover feed and search. They noted that Facebook Inc (NASDAQ:FB) is only starting to realize opportunities from product innovations such as Home, Graph Search, and News Feed particularly on mobile devices.
Wedbush analysts estimated that Facebook Inc (NASDAQ:FB) will deliver $6.8 billion revenue and $0.58 earnings per share for the fiscal 2013. They also projected that the company will achieve $8.50 billion revenue and $0.81 earnings per share for the fiscal 2014.