Facebook, Inc. (NASDAQ:FB) is set to report first-quarter fiscal 2017 earnings results after the closing bell Wednesday. With better-than-expected results in hand from Alphabet Inc (NASDAQ:GOOG, NASDAQ:GOOGL), which cited strong advertising growth, its not a matter of whether Facebook will beat its Q1 results Wednesday, but by how much. And this makes FB stock, which despite soaring to 52-week highs, a compelling bargain.
My crystal ball says Facebook shares can reach $170 on a combination of top- and bottom-line beat and strong guidance.
For the three months that ended March, the Menlo Park, California-based company is expected to earn $1.12 per share on revenue of $7.8 billion, translating to year-over-year growth of 45.4% on both measures. For the full year, earnings are projected to rise 28% to $5.44 per share, while revenue of $37.93 billion would rise 37% YOY.
Reasons to Like FB Stock
Facebook stock closed Friday at $150.25, up 1.73%, reaching the precise target that I told you it would reach back in January. At the time, the emergence and popularity of Snap Inc (NYSE:SNAP), parent of upstart messaging app Snapchat had scared off some investors. But those fears have since disappeared. FB stock — up 32.8% year-to-date — has risen more than 14% since my recommendation.
And with the company now approaching 2 billion active users, when combined with assets such as Instagram and WhatsApp, that translates to massive advertising network poised to generate billions in predictable revenue growth. That’s to say nothing about fast-growing assets such Messenger and the company’s ability to expand internationally. Half of Facebook stock’s revenue currently comes from North America, suggesting there’s an underserved addressable market overseas that the company can tap into.
What’s more, the company’s strategic move into video, which CEO Mark Zuckerberg has successfully executed, has rewarded FB with sizable portion of advertising dollars. And the fact that the company has perfected mobile advertising, which gives it a distinct advantage over Twitter Inc (NYSE:TWTR) and Google.
This explains why research firm eMarketer now expects Facebook to reach some $30 billion in mobile ad revenue in 2017 and $38 billion in 2018, translating to double-digit growth in both years.
In short, FB stock, which relies on advertising for its lifeblood, has tons of routes to help drive revenue growth in the quarters and years ahead.
Bottom Line for Facebook Stock
FB stock is not the bargain it was back in January when it traded under $120, but the long-term thesis is still in play. And given that Facebook CEO Mark Zuckerberg continues to operate with pinpoint execution, the stock, which is priced attractively at just 22 times 2018 estimates — versus 23 P/E for Google — should reach $170 in the next 12 to 18 months, delivering 13% returns.
As of this writing, Richard Saintvilus did not hold a position in any of the aforementioned securities.
