Facebook (FB) is scheduled to report 3Q 2013 earnings after the close of trading on Wednesday, October 30. The actual results are expected to come through at approximately 4:05 p.m. EST with a conference call to follow at 5:00 p.m. This is Facebook's sixth earnings release since its IPO back in May, 2012 and could have a direct impact on LinkedIn (LNKD) and online game-maker Zynga (ZNGA).
Outliers & Strategy
Facebook is expected to report Non-GAAP EPS of $0.19 per share for the 3Q 2013 period. Estimates range from $0.16 to $0.21. (Source: Yahoo! Finance)
Revenues for the 3Q 2013 period are forecast to come in at $1.91 billion, with some forecasts running as high as $2.13 bln.
The options market is pricing in a 14.3% move off earnings when Facebook reports its results. This is almost double the expected volatility that preceded the 2Q earnings release.
Recent News
10/17: Goldman Sachs reiterated a Buy rating and a $58 price target on Facebook, according to a report on Barron's Online. The report cited positive feedback from advertisers that use the Facebook platform.
10/14: JP Morgan Chase is looking for stronger than expected results from Facebook, according to Barron's Online. The firm cited mobile and video ad growth and expansion of Instagram as key drivers, but added the stock may be reflecting the positive news.
09/26: According to Barron's Online, Jefferies & Co. reiterated a Buy rating and raised the price target on Facebook from $37 to $60, citing impressive operating margins. The firm also cited mobile ad growth and expansion of video ads.
Technical Review
Facebook shares recently climbed to a new high of $54.82 on October 18, but has more than doubled since the previous 2Q earnings release back in July. Should Facebook fail to achieve the loftier expectations on the Street, there is initial technical support at $50.00, with downside risk to $47.50, followed by $45.00. Conversely, initial resistance is at the aforementioned high near $55.00. (Chart courtesy of StockCharts.com)
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Summary
Facebook shares have been one of the market's top performers over the past three months, gaining over 100% in that span amid expectations for strong mobile ad growth, video advertising, expansion of Instagram, and increase in daily average users. Given the remarkable appreciation in the share price, market expectations are now exceedingly high, while the options market is factoring in a great deal of volatility. Against this backdrop, Facebook needs to deliver earnings, revenues, and mobile ad growth significantly ahead of estimates to sustain the advance.
