In the most recent news, Needham estimated a missed earnings for Facebook Inc. in the second quarter of fiscal 2016 financial results, that is due to disclose on July 27. The sell-side company highlighted margin pressure and fatigue factors as the main reasons of this forecast.
The advertising revenue of the company is expected to reach 50% year-over-year to $5.74 billion in the period, according to analyst Laura Martin. She anticipates mobile ad to post 83% of the company’s revenue in the quarter, suggesting a mobile top-line of $4.77 billion.
Subsequently, it implies a 1% higher mix of mobile top-line level in the previous quarter, while for payments and other fee revenues, Ms. Martin projects losses of 5% YoY to $204 million.
Apparently, the analyst posted a steady revenue and profitability forecasts for the social media giant’s period-to-be-reported and fiscal year 2016. The revenue growth is estimated to settle at 47% YoY to $5.95 billion, while the non-GAAP earnings per share (EPS) is expected to post at $0.77, suggesting a 52% YoY increment.
About 44% YoY revenue growth to $25.89 billion is estimated by Ms. Martin, while a 52% YoY to $3.47 in FY16 in non-GAAP EPS.
However, it seemed that these forecasts are significantly lower compared to the consensus estimates. Research firms are expecting the company’s revenue for the second quarter for fiscal year 2016 to settle at $6 billion, while revenues for FY16 is expected to record at $26.11 billion.
The analysts’ forecasts for 2QFY16 stands at $0.81 and FY16 EPS posted at $3.56.
Overall, the analyst reaffirmed a Buy rating on the social media giant’s stock, and set a target price of $130. She continued to be a buyer of the stocks and justified that the digital markets are “winner-take-all.”
She believes that the firm is stabilized as it always-registered environment, with legit names, including closed platform, global scale, pervasive distribution, new revenue stream options like video, payments, and commerce, on the core site, and the potential upside in revenue mainly from their other key apps such as Instagram, WhatsApp, and Messenger.
Price Target Risks
The company’s risks in its price objective include margin pressure, as well as acquisitions, fatigue factor, privacy issues, and measurement.
As Facebook Inc.’s return on invested capital inched lower like investments in Internet.org, Ms. Martin, thus, stated that there is margin pressure on the social media giant at present.