Ahead of the Tape: Facebook: Why This Tech Giant Is Special -- WSJ
April 27 2016 - 3:02AM
Dow Jones News
By Steven Russolillo
If there is one company that can buck the tech industry's recent
earnings malaise, it might just be Facebook Inc.
There has been plenty to cheer about the social network's
impressive growth of late, particularly on mobile. It also has
relatively untapped sources of revenue at its disposal over both
short- and long-term horizons, specifically in messaging and
virtual reality.
And coming up on its four-year anniversary as a publicly traded
company, there is reason to believe Facebook's highflying stock can
push even higher, beginning with its first-quarter results, due
Wednesday.
Analysts polled by FactSet expect adjusted earnings of 62 cents
a share, up 48% from a year earlier. Revenue is estimated to have
increased by 48% to $5.3 billion. Facebook has exceeded quarterly
estimates all but once since its May 2012 initial public
offering.
Facebook's transition to mobile has been meaningful. About 80%
of advertising revenue in the fourth quarter came from mobile, up
from less than one-quarter just three years ago. And Facebook's
average revenue per user surged 33% at the end of last year,
continuing its upward trajectory. That helped Facebook earn more
than $1 billion in net income in the fourth quarter.
Granted, that sets a high bar in what has already been a tough
market for tech stocks. Many of Facebook's peers, including
Microsoft Corp., Netflix Inc. and Google owner Alphabet Inc. as
well as stalwarts Intel Corp. and International Business Machines
Corp., have disappointed this earnings season. Late Tuesday, Apple
Inc. and Twitter Inc. also missed expectations.
Highfliers are particularly vulnerable to disappointment, but
Facebook, a historically pricey stock, is looking less so these
days. Fetching 32 times projected earnings over the next 12 months,
Facebook looks like a bargain relative to its short history on the
public markets.
For instance, its forward multiple was nearly twice as high
following its 2012 trading debut. And when the stock bottomed below
$20 later that year, Facebook fetched a multiple comparable to
today's. Notwithstanding the trading hiccups and subsequent slump
after Facebook's IPO, the stock has surged ever since, increasing
at about a 30% compound annual clip.
High expectations are nothing new for Facebook. There is still a
lot to like here, though.
(END) Dow Jones Newswires
April 27, 2016 02:47 ET (06:47 GMT)
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