Is there any truth to what several analysts have called “peak Facebook Inc (NASDAQ:FB)?” FB stock has surged 24% year to date, besting the 6% rise in the S&P 500 Index. And analysts now fear that the arrival of Snap Inc (NYSE:SNAP), parent of upstart Snapchat, may take some wind out of Facebook’s sails in the quarters ahead. But that thesis is about to be proven wrong.
On Monday, the Menlo Park, Calif.-based company announced that its first quarter 2017 financial results will be released after market close on Wednesday, May 3. This could have huge implications for FB stock.
I expect Facebook, which closed Monday at $142.28, to rally at least 5% higher into earnings, putting FB stock — which I told you would rise to $160 — right around $150 per share.
There’s growing concern that the so-called Trump rally, which catapulted the Dow Jones Industrial Average and S&P to all-time highs, has begun to fade. As such, I would agree that FB stock is no bargain at all-time highs, either.
But Facebook — the “F” in FANG — has too many growth levers, including its own attack on Snapchat and Twitter Inc (NYSE:TWTR), to be held back. The company’s strategic move into video, which Mark Zuckerberg has successfully executed, has rewarded Facebook with sizable portion of of advertisers’ dollars.
To that end, Facebook, which boasts more than 1.6 billion monthly active users, is able to neutralize Alphabet Inc’s (NASDAQ:GOOG, NASDAQ:GOOGL) advertising juggernaut YouTube. With the company now approaching 2 billion users, when combined with assets such as Instagram and WhatsApp, that translates to massive advertising network poised to generate billions in predictable revenue growth for Facebook. And to say nothing about the company’s ability to expand internationally.
When considering that half of the Facebook’s revenue comes from North America, this suggests there’s an underserved addressable market overseas that Facebook can tap into to grow its web traffic.
And this justifies Zuckerberg’s decision to increase capital spending. Meanwhile, although Zuckerberg — at the same time — warned of slowing ad revenue, which in the third and fourth quarters spooked investors. I expect Facebook’s revenue guidance this time to surprise to the upside.
Bottom Line for FB Stock
April has consistently been a good month for stocks over the past several years and I don’t expect things to be different this time.
Considering that Facebook CEO Mark Zuckerberg continues to operate with pinpoint execution, I continue to maintain my $160 target on FB stock, using the premise that it should be owned, not traded.
As of this writing, Richard Saintvilus did not hold a position in any of the aforementioned securities.
