The following article was exclusively prepared for LeapRate by the ATFX team.
Facebook (FB) will report Q3 earnings after the close of the trading session on October 30. Wall Street is looking for a 26% sales growth but just 8% earnings growth. Facebook share, has almost lost 8% since it reported Q2 earnings on July 24th, but still is more than 45% higher in 2019.
Facebook keeps growing and delivers impressive results.
FB platforms now include Facebook, WhatsApp, Instagram, and Messenger; it holds a $543 billion capitalization thanks to its ability to attract users across the wide array of its platforms. Beyond advertising, Facebook is exploring opportunities in online shopping, crypto, and payments.
|FB Valuation Measures|
|PEG Ratio (5 yr expected)||1.37|
Facebook earnings for the Q2 beat consensus estimates by 12 cents, growing 14% to $1.99, excluding legal settlement costs. Revenue grew 28% to $16.89 billion. Without the negative forex effect, revenues would have increased by 32%. Although the Q2 results beat the market’s expectations, Facebook shares felt the pressure as declining margins and increased regulatory scrutiny weighed on investors sentiment.
In Q2, Daily Active Users (DAUs) of Facebook increased 8% YoY to 1.59 billion users, while Monthly Active Users (MAUs) grew by 8% to 2.41 billion. DAUs in the USA and Canada, which account for roughly 50% of revenue, showed strong momentum. In June more than 2.7 billion people used at least one of the “Family of services” outlets; Facebook, Instagram, WhatsApp, or Messenger monthly.
Facebook Q3 Outlook
Facebook’s Q3 revenue forecasted to increase by 26.2% to $17.32 billion. FB’s full-year fiscal 2019 revenue is projected to rise by 25.9% from $55.84 billion to $70.29 billion, with next year’s sales expected to be 22% higher to reach $85.63 billion.
At the bottom line of the income statement, FB’s adjusted Q3 earnings are projected to increase 8.5% to reach $1.91 per share. FB’s full-year EPS figure is expected to fall nearly 16% amid an increase in capital expenditures.
The company expects full-year 2019 expenses to grow 53-61% compared to 2018. The $5B in accruals recorded in the first half of 2019 related to the FTC settlement accounts approximately 16 percentage points of this anticipated expense growth. Except for the $2B accrual recorded in Q2, the 2019 expense outlook is virtually unchanged from last quarter.
The online industry and FB have received increased regulatory scrutiny in the last months. In June 2019, Facebook was informed by the FTC that it had opened an antitrust investigation of the company. Beyond that, on July 2019, the US JusticeDepartment announced that it would begin an antitrust review of market-leading online platforms. The data privacy scandal hurts the reputation of the company.
Mark Zuckerberg will appear in front of the House Financial Services Committee on October 23rd to discuss FB’s plan to enter the cryptocurrency market. FB in June announced plans for a blockchain-based cryptocurrency known as Libra.
Facebook Technical Analysis
Facebook stock run an impressive rebound from $173 lows on October 2nd up to $190 at two-week highs. The stock price has gained 45.24% in 2019, while for the last 12 months is 23.59% higher.
|FB Stock Price|
|52 Week Range||123.02 – 208.66|
|Beta (3Y Monthly)||1.28|
|S&P500 52-Week Change||8.02%|
|52 Week High||208.66|
|52 Week Low||123.02|
|50-Day Moving Average||184.28|
|200-Day Moving Average||186.00|
|PE Ratio (TTM)||32.20|
|Earnings Date||Oct 30, 2019|
The momentum is bullish for FB as it managed to cross above all significant daily moving averages in the last two weeks. On the upside, immediate resistance for Facebook stands at $193 the high from September 20th, and a break to the high might drive price up to the next resistance of $202, the high from July 26th. A downside structure in FB may encounter first support at $186.97, the 100-day moving average, below this level, the next barrier comes in at $184.09, the 50-day moving average, which if broken might accelerate the drop further towards the 200-day moving average at $178.02.