Facebook, Inc. (
is set to report second-quarter 2014 results on Jul 23. Last
quarter, the company posted a 38.89% positive surprise. It is
noteworthy that Facebook has outperformed the Zacks Consensus
Estimate in the preceding four quarters with an average positive
surprise of 27.3%.
Let's see how things are shaping up for this announcement.
Growth Factors this Past Quarter
We believe that Facebook's growing mobile user base, Instagram's
increasing popularity and international expansions will boost its
advertising revenues in the quarter. We believe that strong mobile
revenue growth will be a key catalyst. Facebook will also benefit
from the launch of Facebook Audience Network (FAN), a mobile ad
Facebook's focus on improving user engagement through frequent
product updates and new features are the positives amid
intensifying competition from Google and Twitter. However,
aggressive acquisition policy can weigh on the balance sheet.
We note that both WhatsApp and Oculus are long-term growth
opportunities. The Internet.org initiative is also long-term
focused. Lack of revenues from these initiatives can put Facebook's
core business under significant pressure in the near term.
Our proven model does not conclusively show that Facebook is likely
to beat earnings this quarter. That is because a stock needs to
have both a positive
and a Zacks Rank #1, 2 or 3 for this to happen. That is not the
case here as you will see below.
Most Accurate estimate stands at 27 cents while the Zacks
Consensus Estimate is lower at 26 cents. That is a difference of
: However, Facebook's Zacks Rank #4 (Sell) lowers the predictive
power of ESP.
We caution against stocks with Zacks Rank #4 and 5 (Sell-rated
stocks) going into the earnings announcement, especially when the
company is seeing negative estimate revisions momentum.
Other Stocks to Consider
Here are other stocks which you may want to consider as our model
shows that they have the right combination of elements to post an
earnings beat this quarter:
Silicon Motion (
, with an Earnings ESP of +33.33% and a Zacks Rank #1 (Strong Buy).
Western Digital (
, with an Earnings ESP of +4.02% and a Zacks Rank #2 (Buy).
F5 Networks (
, with an Earnings ESP of +3.81% and a Zacks Rank #2.
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WESTERN DIGITAL (WDC): Free Stock Analysis
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