This morning, one of my favorite technology stocks is trending lower after smashing expectations for the third quarter. I’ve reviewed the numbers, and despite the hype it looks like normal profit taking, plain and simple. Opportunities like this don’t happen every day, so in today’s blog I’ll explain why this is such a tremendous buying opportunity.
The stock I’m referring is Facebook Inc. (FB), of course. Chances are, you either personally use the social networking site and app, or your loved ones do. In any event, it’s easy to see why Facebook is the one of the hottest stocks of 2016. What really sets Facebook apart from competitors like Twitter (TWTR) is that it is better able to monetize its social networks.
This was clear in its third-quarter report. Compared with Q3 2015, net income nearly tripled from $869 million, or $0.32 per share, to $2.38 billion, or $0.82 per share. Excluding special items, adjusted EPS was $1.09; this beat the $0.97 consensus EPS estimate by 12.4%.
Total revenue jumped 56% year-on-year to $7.01 billion. Analysts were looking for $6.92 billion, so Facebook posted a 1.3% sales surprise. Mobile advertising revenue accounted for 84% of total advertising revenue, up from 78% a year ago. Facebook also announced that daily active users jumped 17% year-on-year to 1.18 billion, while monthly active users rose 16% to 1.79 billion.
All-in-all, these were tremendous results. Even so, Facebook got hit with some profit taking after the report. This has been a strange earnings season, in that many companies with the strongest sales and earnings have been punished.
However, I do expect FB to rebound with a vengeance. Analysts expect Facebook to post 52% top-line growth and 72% bottom-line growth for 2016. And given Facebook’s earnings surprise history, it’ll likely do even better. FB is an A-rated Strong Buy, and a great deal on the dip.
P.S: I will be speaking at the Seattle Marriott Bellevue in Bellevue, Washington on Wednesday, November 9. This seminar starts at 7 PM and you may attend at no cost, but please call 800-454-1395 to register. I will review where investors can achieve the highest yields in both bonds and stocks, as well my current market outlook, favorite stock picks and have an extensive question and answer session.