Facebook is expected to post a strong first-quarter results backed by higher mobile engagement and strong monetization, stated Oppenheimer analyst Jason Helfstein in a report issued on Sunday. The research firm reiterated its Outperform rating on Facebook and set a price target of $100.
Street conservative on Facebook (FB)
Facebook Inc (NASDAQ:FB) is acquiring a larger share of mobile internet minutes and an increase in advertisers, suggesting that there are more impressions at higher rates. Helfstein expects Facebook Inc (NASDAQ:FB) to post better first quarter sequential trends in social spend compared to last year. The analyst notes that social advertising budgets were “flattish” sequentially, which suggests an improvement from a mid-single-digit quarter over the decline last year. Also click-through rates are improving for the company owing to improved targeting and the rising share of the company in the U.S. mobile Internet, which is expected to increase by 150 basis points year over year.
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The analyst explained, “The Street is modeling first quarter expense growth to outpace the prior quarter’s headcount growth by the highest ever delta, which could prove conservative, in our view, especially given US Dollar strength.” Currency headwinds will weigh on the result for the first and second quarter revenues by 7% and 9% compared to 5% previously, noted the analyst.
However, Helfstein acknowledged that shares of the social network have not performed in line with expectations following the fourth quarter earnings report as the company guided for expenses to surge 50% to 65% year over year.
Slow ad revenues expected
According to consensus estimates, ad revenues are expected to be slow throughout the year, irrespective of the new ad products being launched. The company launched Facebook Audience Network and Atlas across the world in the fourth quarter. Additionally, a recent launch of the LiveRail improvements reflects that revenue from third party sites or applications could provide some upside to second half estimates.
Facebook Inc (NASDAQ:FB) will announce its first quarter financial results on Wednesday after the closing bell. Analysts polled by Thomson Reuters are expecting earnings of 40 cents per share on $3.56 billion in revenue compared to the corresponding quarter of the last year, in which earnings per share came in at 34 cents, while revenue was $2.50 billion. Helfstein expects the social network to post earnings of 42 cents per share on revenue of $3.6 billion.
On Monday, Facebook Inc (NASDAQ:FB) shares closed up 2.87%, while year to date, the stock is up by almost 5%.