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Facebook LONG

by SignalFactory   ·  July 30, 2020 | 10:08:00 UTC  

Facebook LONG

by SignalFactory   ·  July 30, 2020 | 10:08:00 UTC  

Facebook (NASDAQ:FB) is scheduled to announce Q2 earnings results on Thursday, July 30th, after market close.

The most crucial figure investors should look at is revenue growth. In its first quarter, revenue grew 17.6% year over year. Between companies cutting their marketing budgets as a result of the coronavirus and the uncertainty surrounding its own business, Facebook did not provide any guidance for the second quarter. However, it did provide an update for the quarter in late April.

After a few quarters of staying relatively flat, Facebook acquired five million additional daily active users from the U.S. and Canada during the first quarter. Sign-ups from this region are the most valuable by far, increasing to average revenue per user (ARPU) of $34.18. The next closest are users in Europe, where ARPU is $10.64. Investors will be interested in looking at the number of people added from the company’s home market, in addition to the global total.

Lastly, large corporations have been reducing or stopping their advertising on Facebook in support of the Stop Hate for Profit campaign, which blames Facebook for not doing enough to stop hate speech on its site. Large companies made up 25% of Facebook’s revenue in fiscal 2019.

Because most of the announcements of these advertising boycotts started early in July, the impacts will not be reflected in the financials reported by Facebook this week. Rather, management may wish to disclose some information in the conference call following the earnings release or provide detail to analysts during the call. Investors should look for hints regarding how these highly publicized boycotts end up affecting Facebook’s revenue in the current quarter and beyond.

Be prepared for extra volatility:

The uncertainty caused by the COVID-19 pandemic makes these earnings report a unique one. Numerous factors beyond those mentioned above can jolt the price of the stock up or down. Shareholders and potential investors should prepare themselves for unusually high price movements following the earnings release.

  • The consensus EPS Estimate is $1.38 (-30.7% Y/Y) and the consensus Revenue Estimate is $17.36B (+2.8% Y/Y).
  • Expected DAU of 1.75B, MAU of 2.63B, total ARPU of $6.63.
  • Over the last 2 years, FB has beaten EPS estimates 100% of the time and has beaten revenue estimates 75% of the time.
  • Over the last 3 months, EPS estimates have seen 6 upward revisions and 6 downward. Revenue estimates have seen 21 upward revisions and 13 downward.

Facebook LONG (Buy)

ENTER AT: 237.66

T.P_1: 260.91

T.P_2: 283.68

T.P_3: 305

S.L: 217.33

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