* Reports Q1 2019 results on Wednesday, April 24, after the close
* Revenue expectation: $ 14.97B
* Wbe expected: $ 1.61
This year's powerful Facebook (NASDAQ 🙂 stock rally is a powerful message that this troubled social media giant might be back in play after a challenging 12 months.
Now the clear leader of the FAANG group of top technology companies, including Netflix (NASDAQ 🙂 and Amazon (NASDAQ :), Facebook shares have risen nearly 40% since early 2019 and closed at $ 183.78 yesterday. This strong revival comes after a tumultuous 2018, in which shares underwent 26%, undermining investor confidence with a number of notable setbacks, including data breaches, concerns about user privacy and political manipulation of its platform
While these issues continue to pose a major challenge to the future growth of social media companies as politicians and regulators attempt to compile a set of rules to control and combat abuse, investors gain confidence in CEO Mark Zuckerberg's assets to produce market -beat returned even in this unfavorable working environment.
The corporate and telephone meeting, scheduled later today, is likely to provide more evidence to support that bullish view. Facebook is expected to increase revenue by around 20% in 2019, while at just 3% for all companies, according to estimates by Goldman Sachs Global Investment Research. The net profit margin is expected to continue to rise by 34% this year, compared to the 11% forecast for the S&P 500.
In our opinion, this optimism stems from the fact that Facebook's core platform is still growing despite all the setbacks of the past year. During the fourth quarterly presentation on January 30, the company showed that its worldwide daily users had an average of 1.52 billion in the quarter of December, an increase of 9% compared to a year ago.
Advertising appeal still in tact
Facebook, which manages the largest social communities in the world and messaging services, including Instagram and WhatsApp, is still just as valuable for advertisers as for all controversies and scandals. According to estimates from Deutsche Bank earlier this month, Facebook's switch to e-commerce via its Instagram app could add billions of dollars to its revenue within a few years.
The unrivaled reach of the company in combining all its digital features shows that advertisers have no choice but to opt for the duopoly: Google (NASDAQ 🙂 and Facebook, the two platforms that still collect the most user data and have the best opportunities to direct their ads to the right audience.
With this optimism, however, it would be naive to reduce the risks of possible regulations for social media companies in the coming months and quarters. Yet it is also important to know that Facebook has not lost its power and still has many opportunities for growth.
To counteract a possible delay in user engagement, Facebook spends an enormous amount of time introducing new features that can help compensate for lost revenue. After continuing with his video and photo journals, he builds up a new section that shows TV-like web videos & home hardware.
Bottom Line
Even after a powerful rally this year, Facebook shares still look cheap compared to last year. Acting against nearly 24 times the expected revenue for the next 12 months, the stock is about where it was at the end of September, before the sale in the fourth quarter and below the level of early 2018.
We believe that positive user growth and the company's efforts to generate revenue with its popular digital assets will help offset the financial impact of future regulation. Investors should take advantage of weaknesses in Facebook shares after the first quarter of this year's earnings report
