Facebook Earnings Will Keep Showing Why FB Stock Rocks

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Facebook Inc (FB) has a strong track record of earnings beats, topping expectations in each of the past nine quarters. FB stock has also been killing it with share price performance, with Facebook up about 37% in the last year and flirting with a new all-time high.

FBSo it’s probably likely that, given strong success in the past, Facebook stock will again see momentum after its Q3 earnings report.

But should FB stock investors start thinking about taking some money off the table now that shares have run up so much?

The answer to that lies in third-quarter results, and investors will be closely watching events in the coming weeks and months to see if Facebook stock can keep things cooking in 2016.

A History of Facebook Earnings Success

FB stock will post its most recent quarterly results on Wednesday, with estimates calling for EPS of 52 cents on $4.37 billion in revenue. That would be 21% and 36% growth, respectively.

There are few stocks on Wall Street that are growing at that fast a clip, and the fact Facebook is already worth almost $300 billion by market capitalization makes the growth rate all the more impressive.

Furthermore, FB has a lot of future growth potential. In its admittedly mature core business, Facebook continues to innovate with new ways to get more dollars out of its users — including revamped news feeds and video advertisements. Then there is the upside of Instagram, a $1 billion acquisition in 2012 that has proven to be quite shrewd given its brisk user growth and current revenue potential.

Some folks scoff at FB stock for its forward P/E ratio of about 37, but it’s big growth like this and significant profits that make the earnings multiple seem reasonable to so many on Wall Street.

After all, fellow social media stocks like Twitter (TWTR) can’t even operate in the black, and others like LinkedIn (LNKD) have seen growth rates sink dramatically.

Where else would you want to invest?

Facebook Stock a Buy for 2016

With strong outperformance in 2015 and what is sure to be another home run in Facebook earnings later this week, FB stock remains a strong buy for the next few months into 2016.

This is especially true given the market’s volatility in the past year or so and the utter lack of other quality growth options out there.

Looking even further forward, it’s important to remember that Facebook is pursuing growth based on future technology trends — not based on Chinese discretionary spending or the fate of the U.S. recovery. With about 1.5 billion folks logging into FB each month — and most of them on mobile phones — Facebook stock (and the company’s revenue stream) is very reliable.

And if you’re reluctant to chase Facebook because of its high multiple and a fear of a pullback, remember that we’re currently in the midst of the first back-to-back contraction for the S&P 500’s quarterly earnings since 2009 … so think long and hard before you consider the broader market safe from declines, or before you think that consistent double-digit growth is available elsewhere.

FB stock remains a great investment — not just for its upcoming earnings pop, but also because of this strong momentum amid an otherwise weak market.

Jeff Reeves is the editor of InvestorPlace.com and the author of The Frugal Investor’s Guide to Finding Great Stocks. As of this writing, he did not hold a position in any of the aforementioned securities. Write him at editor@investorplace.com or follow him on Twitter via @JeffReevesIP

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Article printed from InvestorPlace Media, https://investorplace.com/2015/11/facebook-stock-fb-earnings/.

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