Social media giant Facebook (FB – Free Report) is set to release its fourth-quarter fiscal 2016 results on February 1 after market close. After five consecutive quarters of earnings and revenue beat, what is in store for the company in Q4?

Investors should note that Facebook has had an impressive run so far this year, locking in gains of about 13.8%. The upside is expected to continue given the positive earnings revision trend, which is generally a precursor to an earnings beat, and attractive fundamentals. However, Facebook has less chances of beating estimates this quarter.

Inside Our Methodology

Facebook has a Zacks Rank #3 (Hold) and an Earnings ESP of -0.89%, indicating lower chances of beating estimates this quarter. Betting on stocks that have a combination of a positive Earnings ESP and a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3usually leads to profits in an investor’s portfolio. Our research shows that the chance of a positive earnings surprise is as high as 70% for the stocks with this combination.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

While Earnings ESP looks a bit weak, other fundamentals will continue to attract investors. This is because the stock saw positive earnings estimate revision of a couple of cents over the past 30 days for the fourth quarter. Analysts raising estimates right before earnings—with the most up-to-date information possible—is a pretty good indicator of some favorable trends for FB in this report.

Additionally, Facebook earnings surprise history is robust with the company delivering a positive earnings surprise of 21.11% on an average in three of the past four quarters. It is expected to post solid earnings growth of 91.1% and revenue growth of 44.5% in Q4.

Further, the stock boasts a solid industry Rank in the top 49% with a top Growth Style Score of A. However, Momentum and Value Style Score of C and D, respectively look unfavorable. According to the analysts polled by Zacks, Facebook has an average target price of $155.81 with more than 90% giving a Strong Buy or a Buy rating ahead of the company’s earnings. This indicates a 19% upside to the current price of FB.

What to Watch?

The focus will be on advertising revenue growth when the company reports its Q4 results. This is because the social media giant on its Q3 earnings call warned that advertising revenue growth will slow down meaningfully in 2017 as ad load (the ratio of ads to personal posts), one of the three key contributors to advertising revenue growth, will start to taper in the second half of 2017.

With narrowing ad growth, investors are looking for meaningful growth in other sources of monetization bets like Instagram and Live.

ETFs in Focus

Given the positive estimate revisions and Facebook’s attractive fundamentals, investors could focus on ETFs having the largest allocation to the social media giant. While there are several ETFs in the space having FB in their roster, we have highlighted six funds that have FB in their top five holdings:

Global X Social Media Index ETF (SOCL – Free Report) — The fund delivered returns of 7.9% since the start of the year and has a Zacks ETF Rank of 3 or ‘Hold’ rating with a High risk outlook. Facebook takes the top spot with 11.6% allocation.

First Trust Dow Jones Internet Index (FDN – Free Report) — The fund added 6.9% in the same time frame and has a Zacks ETF Rank of 3 with a High risk outlook. Here also, FB occupies the top position accounting for 10.6% share.

PowerShares Nasdaq Internet Portfolio (PNQI – Free Report) — It gained 9% and has a Zacks ETF Rank of 3 with a High risk outlook. Here, Facebook takes the second spot with 8.3% share.

iShares Dow Jones US Technology ETF (IYW – Free Report) — This ETF has a Zacks ETF Rank of 2 or ‘Buy’ rating with a Medium risk outlook and added 5.2% since the start of the year. Facebook is the third firm with 7.6% allocation.

Select Sector SPDR Technology ETF (XLK – Free Report) – The fund added 4.1% in the same time frame and has a Zacks ETF Rank of 2 with a Medium risk outlook. Facebook occupies the third position and accounts for 6.5% share.

Vanguard Information Technology ETF (VGT – Free Report) — This product is up 4.8% and has a Zacks ETF Rank of 2 with a Medium risk outlook. FB takes the fourth position in the portfolio and makes up for 5.7% share in the basket.

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