ETFs To Tap Facebook's New Highs Ahead Of Q2 Earnings

Social media giant Facebook (FB - Free Report) is set to release second-quarter fiscal 2018 results on Jul 25 after market close.

Investors should note that Facebook has easily shrugged off concerns over the data-privacy scandal involving Cambridge Analytica that broke in mid-March. It has seen smooth trading over the past three months, gaining 32.1% and beating the industry’s growth of 13.7%. In fact, the stock has touched new highs in the recent trading session on earnings optimism.

The outperformance is likely to continue given the positive earnings revision trend, which is generally a precursor to an earnings beat, and attractive fundamentals though earnings surprise is difficult to predict at this time.

Inside Our Methodology

Facebook has a Zacks Rank #2 (Buy) and an Earnings ESP of -0.67%, implying that a beat cannot be predicted this quarter. According to our surprise prediction methodology, a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) when combined with a positive Earnings ESP makes us confident in predicting an earnings beat. A Zacks Rank #4 or 5 (Sell rated) is best avoided going into the earnings announcement, especially when the company is seeing negative estimate revisions. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

The stock has seen positive earnings estimate revision of a penny over the past seven days for the second quarter. Analysts raising estimates right before earnings — with the most up-to-date information possible — is a pretty good indicator for the stock. Additionally, Facebook’s earnings surprise history is robust with the company delivering a positive earnings surprise of 18.89% on average over the past four quarters. It is expected to post solid earnings growth of 32.58% and revenue growth of 44.09% for Q2.

Further, the stock belongs to a top-ranked Zacks Industry (top 29%) with a top Growth and Momentum Score of A each. However, a Value Style Score of D look unfavorable. According to the analysts polled by Zacks, Facebook has an average target price of $228.21, with nearly 97% of the analysts giving a Strong Buy or a Buy rating ahead of the company’s earnings. This represents 7.6% upside from the current price.

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