Ahead of the Tape: Facebook Rally Too Much of a Good Thing -- WSJ
27 July 2016 - 5:02PM
Dow Jones News
By Steven Russolillo
Facebook Inc. is firing on all cylinders, but even fine-tuned
machines make pit stops.
The social-networking giant's past two quarterly reports were
nearly as close to perfection as possible. Facebook is earning more
money from each one of its 1.6 billion users, a base that is still
growing at a healthy clip. It has become a mobile-advertising
powerhouse, with video being the latest growth area. And its
stock's annualized appreciation of more than 30% from its initial
public offering has pushed it to records.
Already one of America's most valuable companies at nearly $350
billion, it would reach the $1 trillion mark at its current pace by
2020.
Its rapid ascent so far is unmatched by other tech behemoths.
After a little more than four years on the public markets, its
market value is already approaching a level that took Google parent
Alphabet Inc. nine years and Cisco Systems Inc. 10 years from their
respective IPOs to achieve. Microsoft Corp. did it in 13 years.
Amazon.com Inc. reached it in 18 years. Apple Inc. needed over
three decades.
Just how much longer can Facebook keep rallying in this nearly
unabated fashion? Wednesday's earnings report might be just the
catalyst for shares to take a breather.
For one, the bar is set incredibly high. Even the slightest of
missteps could be punished. Analysts estimate adjusted
second-quarter earnings rose 62% to 81 cents a share. That same
estimate was 61 cents a year ago. Revenue is anticipated to have
risen by 49% to $6.01 billion.
Wall Street analysts, usually an upbeat bunch, are particularly
optimistic. Only one of the 49 brokers that cover the social
network has a "sell" recommendation on it, according to FactSet.
That unanimity is unsettling.
More competition could ultimately be the thing that dents
Facebook's earnings. Snapchat's rising popularity among both young
and older users is the latest concern. Snapchat could prompt users
to spend less time and activity on Facebook's properties, such as
Instagram. Analysts at Jefferies project Snapchat could eventually
deny Instagram as much as $150 million in advertising spending.
Minus a stumble immediately following its IPO, Facebook's ascent
has been phenomenal. This all just might be too much to like.
(END) Dow Jones Newswires
July 27, 2016 02:47 ET (06:47 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
Meta Platforms (NASDAQ:META)
Historical Stock Chart
From Apr 2024 to May 2024
Meta Platforms (NASDAQ:META)
Historical Stock Chart
From May 2023 to May 2024