Tuesday's Market Minute: Market Reacts to Facebook Earnings

Strong corporate earnings continue to boost stocks. The Dow Jones ($DJI) and S&P 500 (SPX) closed at fresh record highs Monday and are up in Tuesday’s premarket. Next come two of the biggest technology names, Alphabet GOOGL and Microsoft MSFT, which are set to report earnings after markets close Tuesday. In addition, we’ll hear from the social media company Twitter TWTR. Analysts at Zacks estimate both GOOGL and MSFT will beat last year’s EPS and sales and see TWTR posting higher revenue with lower profits year-over-year. The opposite was true for the social media giant Facebook FB, which reported 3Q results Monday amid ongoing media criticism and a recent stock pullback.

While FB just beat on earnings per share, delivering $3.22 versus the $3.20 consensus, its $29.01B in total quarterly revenue fell shy of estimates by about half a billion dollars. Both were up year-over-year: EPS grew by nearly 19 percent and revenue increased by more than 35 percent. The company’s monthly active users (MAUs) rose by six percent to more than 2.9 billion.

The stock gained in the after-hours following its report, despite the company providing lower-than-expected revenue guidance for 4Q, and Wall Street analysts gave mixed responses. Rosenblatt upgraded the name to Buy from Neutral with an unchanged $400 price target, expressing a “cautiously optimistic” tone, while analysts at Goldman Sachs GM, JMP Securities, and Barclays all lowered their price targets for the stock. Many noted that headwinds continue to cause uncertainty for Facebook, but few are prepared to bet against the giant just yet.

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