- Strong revenue and EPS growth forecast for Facebook
- Bullish outlook possible on Instagram roll-outs
- Oculus Rift virtual reality may be a powerful earner
The future is here (nearly). Meet Oculus Rift, the Facebook-owned head-mounted display
for immersive technology virtual reality . Photo: www.Oculus.com
By Peter Garnry
With almost half of the companies in the 1200 Global Index having reported Q3 earnings we are entering the late stage of the earnings season with less impact on broad equity indices. However, next week will still speed ahead with 215 new earnings releases and non-US companies getting into the game.
Focus on engagement, ad growth, Instagram and Oculus
Facebook reports Q3 earnings on Wednesday after the market close with analysts expecting EPS $0.52 up 21% y/y and revenue $4.4bn up 36% y/y. Our view is that Facebook could easily surprise to the upside on both revenue and EPS as the company takes market share in online advertising (display and video) driven by high engagement. Facebook still has around 22% of all US mobile consumption excluding Instagram and WhatsApp.
As the chart below shows, Facebook's share price has been rising steadily since the bottom in 2012, reaching an all-time-high this week and outperforming its industry group.
Facebook weekly share price since IPO in 2012
Investors will be focusing on Facebook's outlook for Q4 and new product roll-outs such as Instagram self-serve and Instagram's international expansion. Everyone is also waiting for the first numbers of the Oculus virtual reality gadget
which may reach around 0.5 million units.
With Facebook valued at 2016E EV/EBITDA of 19.5x it is to the high side, but given the margin expansion, sticky business model, high growth and international expansion on top of new interesting product roll-outs we believe investors should still be overweight Facebook.
Other important companies reporting next week...
Monday: HSBC, Ryanair, Nissan Motor, Visa, AIG, Estee Lauder
Tuesday: Itau Unibanco, UBS, BMW, Coloplast (Global Alpha Pick*), Intesa Sanpaolo
Wednesday: Softbank, Honda Motor, ING Groep, Swedish Match, Facebook, Allergan, Qualcomm, Time Warner
Thursday: Zurich Insurance, Deutsche Telekom, adidas, Vestas Wind Systems, Sampo, Societe Generale, Credit Agricole, AstraZeneca, Toyota Motor, Walt Disney, Celgene, Kraft Heinz, Duke Energy, Monster Beverage
Friday: Allianz, Maersk, Telefonica, Berkshire Hathaway, Cigna, Humana
All of next week's earnings releases can be found in the attached PDF.
* Based on our Global Alpha model on global equities
– Edited by Clare MacCarthy
Peter Garnry is head of equity strategy at Saxo Bank