Related FB Fast Money Traders Share Their Opinions On Whirlpool, Freeport-McMoRan And Facebook Is Whirlpool (WHR) Likely to Miss Q3 Earnings Estimates? Making Money With Charles Payne: 10/23/14 (Fox Business) All eyes will be on the European Central Bank over the weekend as it makes the results of its stress tests on eurozone banks public.
While the ECB has not released any details about the tests and cautioned investors not to listen to the “tips” being released by banks, investors have already been predicting next week’s outcome. Most expect to see around 10 banks from struggling southern nations like Greece and Italy fail. Investors also predicted that the amount of capital that the region’s banks will need to raise over the next nine months in order to pass will be modest and won’t have a major impact on confidence in the eurozone’s financial sector.
Meanwhile, the FOMC is set to convene for a two day meeting next week with the third quarter over. The committee is expected to finish tapering the Fed’s bond buying program by cutting out the remaining $15 billion worth of bond buying that the central bank has been carrying out.
Key Earnings Reports
Next week investors will be waiting for several key earnings reports including Facebook Inc (NASDAQ: FB), Twitter Inc (NYSE: TWTR), Starbucks Corporation (NASDAQ: SBUX) and Exxon Mobil Corporation (NYSE: XOM).
Facebook is expected to report third quarter EPS of $0.40 on revenue of $3.11 billion, compared to last year’s EPS of $0.25 on revenue of $2.02 billion.
On October 9, Wedbush gave Facebook an Outperform rating with an $80 price target, noting that the company will likely continue to prosper in the fourth quarter.
“The agencies generally noted that spend on Facebook continues to increase y/y and q/q. One specific agency, who is heavily levered to mobile and direct response, noted that its Facebook spend was up by more than 25% q/q. The outlook for 4Q and 2015 also appears healthy. eCPMs also appear to be rising y/y and q/q due to rising newsfeed (NF) demand, right rail (RR) format changes, and new ad units (such as video). Specifically, the agencies suggested aggregate eCPMs were up 15-25% q/q with RR eCPMs up 100% q/q due to recent format changes (though noted that RR inventory was also lower due to the changes). We believe the pricing data is likely directionally accurate, but biased upward due to these agencies’ mobile and DR exposure. Mobile app install ads remain an area of interest given recent commentary from some mobile gaming companies about potentially shifting budget dollars away from Facebook and toward other channels. Feedback from the agencies appears to suggest that demand for Facebook’s mobile apps install ads remains strong, with continued increases in CPI. It appears that some gaming companies could be shifting budgets, as they may be getting crowded out due to the relatively higher costs on Facebook.”
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On October 13, Citi gave Facebook a Buy rating with an $86.00 price target, saying that recent data comparing advertising revenue between Facebook and Twitter could be misleading.
“Recent analysis has compared total advertising revenue per MAU or ARPU between FB, TWTR and other Internet media companies. However, this approach inherently assumes a number of things – most importantly, that the two companies do, or eventually will, have comparable user engagement and, thus, available ad inventory to monetize. In the case of FB and TWTR, the differences today are significant. Using both time spent data from comScore and our own method for comparing avg feed views per user, we estimate that TWTR’s ad monetization per user ($0.53/Feed View/Month and $1.84/Mins Spent/Month) is actually 2-3x greater than FB’s ($0.23 and $0.63, resp.). See Figs 1-4 on page 3. The fact that TWTR’s monetization is actually higher than FB’s today shouldn’t surprise anyone for two reasons: 1) we believe FB’s ad revenue today includes a greater mix of self-service, SMB/DR advertisers (which tend to have relatively lower CPMs than TWTR’s with a greater mix of direct sold, custom deals with larger brands and agencies); and 2) FB’s ad CPMs are likely depressed relative to TWTR given a greater abundance of inventory (i.e., less scarcity) as a result of having 5x more users, 5x more engagement/user, and a higher ad load.”
On October 14, Credit Suisse gave Facebook an Outperform rating with a $90.00 price target, noting that the company’s advertising revenue is expected to continue growing.
“Following positive channel checks, we draw additional comfort in our 3Q14 advertising revenue estimates and note that there is upward bias given: 1) pricing for mobile app install ads continued to inflate by low-to-mid single digits QOQ and up ~30% YOY in 3Q14 due to advertiser adoption in new categories outside of gaming, 2) brand advertiser budgets allocated to Facebook's Page Post ads in the newsfeed (ex-app install ads) have remained relatively stable QOQ despite an elevated level of spend in 2Q14 (partially in association with the World Cup), 3) the broader rollout of a newer ad creative for RHS ads on desktop, which our checks indicate has resulted in a material boost to performance (i.e. CTRs) and pricing, and 4) continued growth in budget contribution from direct advertisers towards FBX as Facebook continues to improve targeting.”
On October 15, Deutsche Bank gave Facebook a Buy rating with a $90.00 price target, noting that the company’s engagement has been helped by recent events like the Ice Bucket Challenge and the World Cup.
“Our proprietary checks on FB have been solid all quarter, highlighted by: 1) increased engagement from World Cup and modest help from Ice Bucket Challenge, 2) increased penetration of key ad products like Website Custom Audiences plus modest help from mid-Q ad frequency increase, and 3) the early signs of traction in new areas like video and Instagram. After 6+ quarters of catch up, the Street appears to be layering on the ad revenue opportunity at +59% y/y (vs. DB 61%). As we highlighted in our recent report titled Facebook Payments – Exploring The Potential Opportunity, we think FB’s multiple should be supported by new revenue streams and innovation vs. just ad revenue beats (which has been the story through mid ’14). We are modeling mobile at 66% of ad revenue, or just shy of $2B based on steady increases in eCPM in like-for- like geos. Larger right hand rail ads have shown meaningful increases in CTR and CPC based on checks.”
On October 20, Topeka Capital Markets gave Facebook a Buy rating with a $100.00 price target, noting that engagement has been consistently strong and demand for the company’s advertising is on the rise.
“Our checks throughout the quarter on Facebook have been remarkably consistent, in that, engagement has been strong, pricing remains solid, and advertiser demand for Facebook's ad platform is increasing. As a result, we feel confident that investors should buy the stock into the earnings results next Tuesday (10/28), which are likely to come in above consensus, versus tough comparisons. Facebook is moving comfortably into the neighborhood of other large platform and ecosystem companies such as Google (GOOGL-$522.97:Buy), Amazon (AMZN- $303.64:Buy) and Apple (AAPL-$97.67:NR), and should be viewed as a must own stock for technology and media focused portfolios.”
Twitter is expected to report third quarter EPS of $0.01 on revenue of $351.32 million.
On October 9, Wedbush gave Twitter a Neutral rating with a $50.00 price target, saying that that the company’s advertising structure may need some revamping.
“Overall, feedback seems to suggest that spend on Twitter continues to grow nicely y/y and q/q. There appears to be healthy demand for the company’s app install ad unit. That said, there do appear to be some issues with advertisers who want to target based on age, as Twitter does not always have age data for its users. The agencies view MoPub as a high-quality mobile supply-side platform and ad exchange with substantial growth potential. It’s not yet clear how MoPub will interact with FAN, though appears it will likely be some form of competition. There was some debate among the speakers about Twitter’s ad pricing relative to value. Some agencies believe that pricing outside of North America and the UK may need to come down, while others feel it is justified by the ROI.”
On October 21, MKM Partners gave Twitter a Buy rating with a $64.00 price target, noting that user growth metrics will be an important driver for the stock’s value.
“We don’t have a sell-side consensus on MAUs, but our view on buy-side expectations is that below 14mn net additions is a miss, 14-17mn is in-line and above 17mn is a beat. Our forecast is for 18mn net additions. We think the margin of difference between the high-end and low-end of expectations says little about fundamentals (i.e. only 10bps on Q2 MAUs). We also think that even the high-end of expectations is still not a very good number. TWTR has a long way to go in reducing churn, fixing user experience and reinvigorating user growth. FB (NR, $76.95) has nearly 5x as many users and added 41mn last quarter. We do, however, think the stock reaction will be overly weighted to MAU metrics again this quarter. Investors feel reassured that mgmt believes user growth initiatives are gaining momentum and that the new CFO has not repositioned narrative away from user metrics.”
On October 24, Wunderlich Securities gave Twitter a Hold rating with a $45.00 price target, noting that the company’s previous earnings reports raised red flags as far as user growth.
“Twitter's first two quarterly earnings reports were overshadowed by concerns regarding the company's ability to grow its user base due to slower monthly active user growth. In Q2 the company benefited from a dedicated World Cup product and global audience tuned into real time events, which helped the company add 16 million MAUs, up from 14 million in Q1. We are modeling for the company to add 14 million MAUs in Q3 and the ability to drive new users and retain them should be tested without a major real time event.”
Starbucks
Starbucks is expected to report third quarter EPS of $0.74, compared to last year’s EPS of $0.60.
On October 18, S&P Capital IQ gave Starbucks Corp a Buy rating with a $93.00 price target, citing strong fundamentals as a reason for its optimism.
“Our buy recommendation reflects our view of the company's strong fundamentals. Although U.S. consumers have been cautious, we think SBUX will be less affected than its peers because its customers are generally more affluent and have likely prospered from the economic recovery. We view positively the company's expansion into baked goods and other beverages such as tea and orange juice. Additionally, we believe the company is in the early stage of store expansions in international markets, particularly China, India, and Russia.”
Exxon Mobil
Exxon Mobil is expected to report third quarter EPS of $1.75, compared to last year’s EPS of $1.79.
On October 15, Credit Suisse gave Exxon Mobil a Neutral rating with a $105.00 price target, saying that the company can likely withstand oil’s recent price drop.
“Running lower sensitivities through the Majors' business models, we find CVX would need to stop the buyback, XOM would need to slow, and COP would need to lower capex by a billion dollars or so. Asset sales seem challenged given the supply of assets on the market but could be used to sustain buybacks if the right prices were achieved. In the coming years, the US majors are exiting a period of major capital spend on LNG and heavy oil, particularly XOM and CVX (but also COP / OXY to a lesser degree). As the cashflow from these assets comes on stream and capital is freed up, the defensiveness of the Majors improves.”
On October 18, S&P Capital IQ gave Exxon Mobil Corp a Hold rating with a $105.00 price target, saying that it sees the company expanding further globally.
“We see upstream growth opportunities (deepwater, Arctic and Black Sea, LNG, unconventional), but projections have been pushed further out than previously forecast. We think XOM's project development capabilities have provided a strong pipeline of long-lived upstream assets with improving decline rates, and the downstream unit should benefit over the long term from its complex large refineries. We see further expansion of activities in global LNG and frontier regions and targeted divestments across businesses. We think XOM will remain active in M&A markets.”
Economic Releases
Next week’s economic calendar will be packed full of market moving data with several big releases including U.S. GDP and Japanese and Chinese manufacturing data. The figures will help investors get a better picture of the health of the global economy, especially in Asia, where economic indicators have been mixed.
Daily Schedule
Monday
Earnings Releases Expected: Amgen Inc., Franklin Resources, Canon, First BanCorp , Merck & Company, T Mobile US, Twitter Economic Releases Expected: Hong Kong’s trade balance, US services PMI, US pending home sales, Japanese retail salesTuesday
Earnings Expected: Aetna Inc., BP p.l.c., Coach, Facebook, 1-800 FLOWERS.COM, Kimberly-Clark, Marriott International, Novartis AG, Pfizer, United States Steel Corporation Economic Releases Expected: US Durable goods orders, US redbook, US consumer confidence, Japanese industrial productionWednesday
Earnings Expected: Automatic Data Processing, Pilgrim’s Pride Corporation, Praxair, Ralph Lauren, Suncor Energy, Visa, WellPoint Inc. Economic Releases Expected: French consumer confidence, Spanish retail sales, British mortgage approvals, British consumer credit, US oil inventory data, FOMC meetingThursday
Earnings Expected From: Alcatel Lucent, Cardinal Health, Inc., Conoco Phillips, CVI Energy, Kellogg Company, Mastercard Incorporated, Starz, Royal Dutch Shell PLC, MGM Resorts International, Time Warner Cable Economic Releases Expected: Spanish GDP, Germany’s unemployment rate, eurozone consumer confidence, eurozone industrial sentiment, US GDP, German CPI, Japanese CPI, Japan’s unemployment rateFriday
Earnings Expected From: No notable releases expected Economic Releases Expected: Japanese housing starts, German retail sales, French PPI, Spanish current account, eurozone CPI, eurozone unemployment rate, Italian CPI, Italian PPI, Canadian GDP, US consumer sentiment, Chinese manufacturing PMI Latest Ratings for FB| Oct 2014 | Shanghai Securities | Initiates Coverage on | Buy | |
| Oct 2014 | Credit Suisse | Maintains | Outperform | |
| Oct 2014 | Piper Jaffray | Maintains | Market Outperform |
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View the Latest Analyst Ratings
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