Weak revenue growth rates outlook hurting Facebook stock sentiment
Facebook INC (NASDAQ:FB) reported revenues of $7.01 billion for the third quarter as against $4.5 billion in the corresponding quarter, registering a 55.8% rise. Net earning came at $3.17 billion against $1.63 billion in corresponding period, a jump of 94.5%. The EPS was at $1.09 per share Vs $0.57 per share. Increasing ad loads- the number of ads on the website- has been one of three main factors of Facebook’s growth along with the user growth and increasing time spent on the platform. Advertising revenue grew to $6.82 billion above street estimates of $6.71 billion. Monthly active user rose to 1.79 billion and for the first time, more than 1 billion users were active only on their phones every month. The average revenue per user was at $4.01 in the reported quarter.
On the other hand, the reason for the stock fall is the weak outlook issued by the company. Facebook expects a revenue growth rates to fall as company lap strong quarters. But, the company is hiring aggressively and investing in data center expansion, even as it reached a limit on how many ads it can show on its properties. The company proposed to make changes to its tax approach to its employee equity awards in 2017 – a method that would have increased cash outflows by $1.8 billion through September if it had been used in 2016. It further said, that investment in new ad products would continue to enable more advertiser appetite.
Meanwhile, the company proposed to make some key improvement to become a video-first platform, after experiments with creative tools in-app camera functions across the apps. One change would be a separate vide experience and another will be investing in infrastructure to deliver the best videos quickly.
Facebook stock has been subdued since the last three months which fell over 1.2% and with today’s results, the stock could be under pressure in short term opening opportunity to value based investors. Being a value stock, many brokerage firms have reiterated their confidence on the stock with a “Buy” rating today. Baird analyst expressed concerns over the group’s user engagement but said that Facebook has a massive combination of scale, strong technology orientation, and platform breath/diversity. However, Richard Greenfield from BTIG downgraded the stock to Hold. The stock is trading at 1year forward P/E of 40.5x and has consensus Buy rating with target price of $155 per share. The stock fell over 5% in the morning session.
Despite decent results, QUALCOMM stock pressure continues
QUALCOMM, Inc.(NASDAQ:QCOM) reported a revenues of $6.2 billion for Q4FY16 beating Zacks consensus estimates of $5.788 billion and recorded a 13% YoY growth. GAAP net income was at $1.6 billion gaining 51% YoY. For the full year the company reported a revenues of $23.5 billion and a dip of 7% while net income fell by 13% to 46.7 billion. The cash and cash equivalent was at $32.4 billion. However, after opening positive in the opening session today, the stock is facing pressure after that.
The company accounted a $154 million of charge due to net restructuring and restructuring- related charges to Strategic realignment plan in fiscal 2016 and also $380 million gain related to the sale of spectrum in the United Kingdom in the first quarter of fiscal 2016.
Qualcomm on October 27, 2016 announced a definitive agreement to acquire NXP semiconductors N V for estimated total cash consideration of $38 billion. NXP is a leader in high performance, mixed signal semiconductor electronics in automotive, broad based microcontrollers; secure identification, network processing and RF power products. The transaction is expected to close by end of calendar 2017 and is subject to regulatory approvals in various jurisdictions. The company intends to fund the transaction with cash held by foreign entities. With this move, experts believe that QUALCOMM has a potential of being next Intel.
Since September 25, 2016, the company repurchased and retired 1.9 million share of common stock for $124 million and has announced a cash dividend of $0.53 per share payable on December 16, 2016.
For FY16, the effective income tax rates were 17% for GAAP and 18% for non GAAP while for Q4 it was 18% GAAP and 19% for non GAAP. Qualcomm expects its first quarter of 2017 to be in the range of $5.7 billion to $6.5 billion. The expected EPS for the period is $0.91-$1.01 per share while non GAAP diluted EPS should fall in the range of $1.12- $1.22 per share.
The stock has been on a bullish momentum this year, which generated a returns of over 32.4% during this year to date. The stock is trading at a one Year forward P/E of 16.6x and has a consensus target price of $68.77, which is a limited upside from the current levels as per Tipranks.com. The stock is currently trading at $67.1 and down 0.5% (as of 10:11AM EDT; Source: Google finance).