On Jul 9, 2014, Zacks Investment Research upgraded
Facebook Inc. (
to a Zacks Rank #1 (Strong Buy). A strong return of 146.3% over the
past one year, long-term expected earnings growth rate of 32.1%,
impressive growth in mobile ad market and a positive estimate
revision trend make Facebook an attractive investment option.
Why the Upgrade?
Facebook has posted an average positive surprise of 27.34% over the
last four quarters. The company's strong growth in mobile
advertising market (59.0% of ad revenues) driven by increasing
mobile engagement, higher number of marketers, continuing
investment in new products and robust performance of its newsfeed
ads are the key growth catalysts.
Per eMarketer, the U.S. market for digital advertising is set to
grow 42.0% in 2014 to $5.96 billion. According to Gartner, ad
market spending is expected to hit $42.0 billion in 2017. Facebook
continues to acquire start-ups to expand its ad product portfolio,
which will boost its market share amid significant competition from
Moreover, launch of App links, location-tracking mobile app, Nearby
Friends, an updated Paper app and entry into the payments business
through mobile wallet and remittance services are the long-term
positives. The launch of mobile ad network Facebook Audience
Network (FAN) significantly expands its total addressable market.
We believe that Facebook's huge scale and loyal customer base will
continue to attract app developers, helping it to further gain
traction and improve monetization in the long run. The social
network company will also benefit from Instagram's strong growth
momentum in the near term.
The Zacks Consensus Estimate for fiscal 2014 remained steady at
$1.17 per share over the last 30 days. This represents
year-over-year growth of 96.0%.
For fiscal 2015, the Zacks Consensus Estimate increased a penny to
$1.56 per share over the same time frame, representing
approximately 33.0% growth on a year-over-year basis.
Other Stocks to Consider:
Other players in the technology industry, which look attractive at
current levels, include
Intel Corp (
. Both the stocks carry the same Zacks Rank as Facebook.
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