Stifel Says Facebook Well Positioned Into Q4; What To Watch On The Call?

Stifel sees an upbeat earnings from Facebook Inc FB when the social media giant reports its fourth-quarter numbers on February 1. The brokerage also believes that Facebook is well-positioned heading in to 2017, despite concerns over declining ad-loads.

Expectations For Quarter Print

Facebook is expected to announce strong results as third-party advertising agencies have reported a strong holiday season for digital advertisers as well as a late surge in political video advertising on Facebook.

Facebook remains a key beneficiary from the increasing shift of advertising dollars to digital channels due to its scale, targeting capabilities and engagement levels.

Stifel expects fourth quarter EPS of $1.37 on 46 percent rise in total revenue to $8.52 billion. Street anticipates EPS/revenue of $1.30/$8.51 billion. The brokerage expects ad revenue to grow 48 percent to $8.3 billion.

“We think Facebook is well-positioned heading into 4Q and 2017, as ramping monetization of Instagram, video, and Messenger/WhatsApp should support modestly decelerating growth,” analyst Scott Devitt wrote in a note.

Delving Deeper

Among the recent developments, the company showed signs of ramping ads in Messenger later this year as it is testing ads in Facebook Messenger in Australia and Thailand.

However, Devitt noted that Facebook will face more challenging comparisons during 2017, as it laps accelerating growth in first half of 2016. That said, the analyst expects emerging ad products/Instagram/video to support healthy, yet moderating, growth.

Devitt expects investors to focus on the following areas on the earnings call:

1. “Updates on general core advertising trends/performance."
2. “Trends in overall user engagement.”
3. “Traction with recent product updates.”
4. “Guidance for 2017 opex growth.”
5. “Updates on Instagram / video (including Live).”
6. “Details on messaging monetization timing.”

Devitt rates Facebook shares Buy, with a price target of $155.

At last check, shares of Facebook were down 0.15 percent to $132.58.