FB Stock Could Pop on Thursday’s Call
Facebook Inc (NASDAQ:FB) is one growth story made for the books. Some of the new developments hint that the company’s performance this year will be nothing short of last year’s. Here’s why I’m positive that FB stock investors are in for more good news during Facebook’s fourth-quarter earnings call this Thursday.
Facebook is reporting its fourth-quarter results after the bell on Thursday and I’m seeing a rebound in FB stock that could take it back above $100.00…and even beyond!
Facebook may be making a foray into the technology hardware sector through its Oculus VR acquisition, but its primary source of revenue has been, and will remain to be, ad dollars. From where I see it, two new features launched in 2015 are particularly expected to have given a solid boost to the company’s bottom line in the fourth quarter.
Now, Facebook may not be a full-blown e-tailer but its “Dynamic Product Ads” feature launched in 2015 is redefining conventional e-commerce. With this feature, advertisers are using Facebook as an Amazon-like service to drive sales for their products. I’m seeing this feature to be contributing significantly to the fourth-quarter revenue numbers. The holiday season, in particular, is expected to have driven high demand for ads and ultimately higher conversion rates for advertisers.
Here’s a quick take on how it works; the feature integrates a purchase option on Facebook for a merchant’s advertised products. These “Buy” buttons let users buy products from within the app, without having to ever leave the platform. Plus, payment information is also kept safe as payments are processed through Facebook, without the information ever reaching the merchants.
Supporting this will be the video advertising feature Facebook introduced in the second quarter of 2015. Investors must take note that this feature is expected to have contributed markedly to Facebook’s top line during this quarter.
I say this because of the total of more than 45 million small and medium-sized businesses active on Facebook, only about 1.5 million had utilized this feature by the end of last quarter. There’s massive room for growth here!
Adding to this growth are the introductions of 360-degree videos backed by immersive virtual reality technology on Facebook’s platform. Facebook has already taken big corporations like, Samsung, Disney, and AT&T, on board in the last quarter to use the company’s platform for 360-degee video advertising.
Now, the Street’s consensus estimate for earnings stands at around $0.50, which is a 56% increase in Facebook’s bottom line compared to the same period in 2014. I’m seeing Facebook easily beating this number. The only headwind is the strengthening dollar that could put a dent in the bottom line for all the ad dollars repatriated from regions other than North America. However, I see the stronger tailwinds easily countering the greenback’s negative impact.
What to Expect from FB Stock in 2016
Going into 2016, some of the latest products, including Facebook’s “Sports Stadium”—a new dedicated way to engage sports fans through its platform—Facebook’s artificial intelligence assistant “M,” and the monetization of “Messenger” and “WhatsApp” through e-commerce, spell a positive outlook for the company.
An important number to look out for will be the number of “Oculus Rift” preorders, which will give us a hint on where the demand for the headgear is headed in the coming year. If this number is stellar, expect this hardware business segment to further add to Facebook’s revenue base in the long-term.
Should Facebook meet these expectations, which I strongly believe it will, expect a quick pop, followed by a steady northward journey in the coming year.
Through 2016, I’m seeing FB stock returning even better returns than the previous year.