Facebook Inc is set to release its second quarter (Q2 2015) earnings on July 29. It appears that some in the market don’t concern itself much with Facebook’s current earnings and revenue. Investors may be confident that Facebook has long-term potential ahead and they are not bothered about how the firm fares in the short term.
Brean Capital Confirms Optimism
Earlier this morning, analysts at Brean Capital maintained their “Buy” rating on Facebook and put a $108 price target on the stock. A $108 price target computes a 20.32% upside movement over Facebook’s $89.76 closing price on Wednesday July 15.
Sarah Hindlian of Brean Capital says that her firm expects Facebook to report revenue and earnings in line with the consensus estimate when it reports on July 29. The Wall Street forecast says that Facebook will report earnings of $0.47 per share on revenue of $3.98B.
Hindlian said, “we expect Facebook to print a relatively in-line Q2’15… We believe that quarterly results are less relevant than in the past, with most eyes fixed on the future, as Facebook begins to ramp Instagram monetization in earnest late this year and heating up in FY’16, reflecting our long-term bullish view on the stock”.
All Sights on the Future
Hindlian’s bullish thesis echoes the possibility that Facebook is not being valued fairly. Market forces are keeping the share price of Facebook in the $80 – $90 range. Yet, the range in based on the ad revenues that the firm makes on its Facebook social network.
The fact that Facebook has Instagram, Messenger and WhatsApp has not been taken into account fully. Those largely ignored assets of Facebook might be the keys that will unlock an increase in the firm’s income in the next couple of years.
Ross Sandler of Deutsche Bank in a report that was released yesterday opined that they expect to see “meaningful upward estimate revision over the next 2-3 years as the family of apps outside of core FB start to monetize”.
In addition, Sandler believes that there is much latent value in Messenger, WhatsApp and that Facebook can expect to see some “$9B-$10B in potential incremental revenue by 2020″ when both platforms start to make money.
Last month, analyst Ronald V. Josey of JPMorgan wrote that the shares of Facebook were worth at least $101 per share. He said Facebook will likely “Outperform” the market and his optimism was hinged on the evolution of Instagram’s ad products and integration with Facebook’s ad technology.
If you own the shares of Facebook, it might be smart to focus on the long-term prospects of the firm in line with the thoughts of the analysts mentioned above. The stock might swing based on the quality of the results that it posts on July 29; yet, Wall Street sees stock as northbound against all hurdles.