A day after the social networking site went dark for 50 minutes, Facebook is gearing up to report earnings after US exchanges close on Wednesday January 28th. Will the street still like them this time around? Facebook knocked earnings out of the park in the third quarter but shares are currently sitting around 3% lower, in large part because of guidance of costs being 50-70% higher in 2015. Investor nervousness over rising costs will need to be calmed by increasing advertising revenue, particularly from mobile. Consensus is for mobile to make up 67% of the $3.49bn total ad revenue, so anything above $2.45bn in mobile ad revenue should be bullish for the stock. The worry which Facebook have largely quashed in recent quarters is that it eventually becomes another ‘MySpace’ to the next big thing in social media. To monitor whether users are starting to tire of the site investors monitor the “engagement rate” (daily active users DAUs / monthly active users MAUs). The engagement ratio in Q3 was 64%, Q4 needs to match or exceed this to show the Facebook is still as popular as ever. Earnings Expectations Facebook is expected to earn adjusted EPS of $0.48, up 55% from last year, on expected sales of $3.7B up 46% over year. Last quarter, Facebook beat the street by a bit earning $0.43 slightly more than the $0.40 consensus estimate. Sales of $3.20B were slightly above the $3.11B estimate. FB trades at 74X trailing earnings and 42x forecast earnings so quite a bit of growth is still priced in. Chart Analysis FB has levelled off in recent months after a big summer rally. Two attempts to clear $80.00 have failed and a double top appears to be in place. A recent lower high near $78.75 and RSI falling back under 50 suggest momentum starting to turn downward. For now, the shares appear to be stuck in a trading channel between $72.00 and $82.00. Fibonacci support near $75.75 is currently being tested but if that fails, the bottom of the channel which clusters with a 38% retracement level and the 200-day average could be probed. CMC Markets is an execution only provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.
Trading Analysis: Facebook Earnings Preview
01:00, 28 januari 2015