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Technology Stocks : Facebook, Inc.
FB 174.98+0.2%5:20 PM EDTNews

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To: Glenn Petersen who wrote (2723)7/25/2017 9:34:53 AM
From: The Ox1 Recommendation

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Glenn Petersen

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FB has been solidly adding EPS while revenue growth % has been slowing. Naturally, when you get to the size of FB, it's understandable that past performance in revenue growth will not be the same in the future. The key is the ability to translate the revenue gains into bottom line performance. They've done this exceptionally well over the past 3 years.

I think it's obvious that the trend in revenue growth will continue to slow. What will be the EPS growth rate yoy? If we look at current estimates, they are showing 25% growth and EPS over $6/share in 2018....all while revenue growth will drop below 30% yoy. Add in the $11/share cash reserve and we're close to the current price (25x6)+11 = $161.

Investors seem to think it will. Analysts are looking for profits of $1.12 on revenue of $9.2 billion for the quarter. That would be almost 43 percent revenue growth over the same quarter a year ago; certainly not bad, but also not where Facebook has been the past two years. It would mark the company’s smallest year-over-year revenue growth jump since mid-2015.

So I think the greater question is: Are future EPS estimates going to stay where they are, increase or drop? If they drop, look out below, as the stock appears to be priced on the current future estimates. Similarly, if they increase, there might be plenty of room for the stock price to grow.
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