(Note: The author of this fundamental analysis is a financial writer and portfolio manager.)
Facebook Inc. (FB) shares are off to a terrible start in 2018, with shares of the stock falling by nearly 5% on the year, underperforming the S&P 500 by nearly 6 percentage points. But even worse, shares remain almost 13% off there 2018 highs at the beginning of February. Negative headlines over user privacy and the increasing risk of regulations coming down from the U.S. government have plagued the shares in 2018.
To this point, analysts seem undeterred and remain quite the optimists, despite all the negative headlines and poor stock performance. Analysts see the shares of the stock rising by nearly 28% from its current price around $168, with an average price target of $215. Additionally, analysts' revenue and earnings estimates have been steadily rising since the start of the year, with the company's results for the first quarter expected April 25 after the close of trading.
First-Quarter Outlook Remains Strong
Analysts are forecasting that revenue will rise by over 42% in the quarter to $11.42 billion, while earnings are seen falling by 1% to $1.35 per share. Analysts' revenue estimates have risen by over 3% since the start of the year, while earnings estimates have climbed by nearly 10%. To this point, based on the current forecast, it would suggest that analysts do not see an impact on Facebook's business from the negative headlines.
Full-Year Outlook Optimistic
That bullish sentiment carries out over the full year, with analysts raising those revenue and earnings estimates. Revenue estimates have increased by 3.25% since the start of 2018, while the earnings estimates have climbed by over 10%. The full-year 2018 earnings are seen rising by roughly 18.50% to $7.29 per share, while revenue is forecast to increase by over 36% to $55.33 billion.
Rising Price Targets
Since Dec. 5, analysts have increased their price target by over 4%, while forecasts have the average price target at $206. The average price target has declined slightly, by 3.8%, from a high of $222 on March 19. But that target is still nearly 28% higher than the current stock price around $168.
For now, analysts remain optimistic that Facebook's growth will continue uninterrupted based on current estimates for the coming quarter and the year. It makes the upcoming quarterly results and forward-looking commentary critical to keeping those bulls from turning into bears.
Michael Kramer is the founder of Mott Capital Management LLC, a registered investment adviser, and the founder of the company's actively managed, long-only Thematic Growth Portfolio. Kramer typically buys and holds stocks for a duration of two to three years. Click here for Kramer's bio and his portfolio's holdings. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein.Upon request, the advisor will provide a list of all recommendation made during the past twelve months. Past performance is not indicative of future performance.