Wall Street Loves Facebook Into Earnings Tonight

If you are like me and pore over Wall Street reports every day, what will jump out at you is the fact that Wall Street absolutely loves Facebook. A negative thesis by a sell-sider is hard to come by on Facebook and even the darksiders don't have much negativity for the company despite waxing negative on everything techland, for what seems like, since time began.

Facebook will be reporting earnings for its June quarter this evening after the close of regular market trading.

Wall Street analysts are expecting the company to earn $1.13 per share on $9.2 billion in revenues for the June quarter.

For the current quarter, ending in September, Street consensus is for earnings of $1.16 per share on revenues of $9.6 billion.

For 2017, current sell-sider consensus is for earnings of $4.90 per share on revenues of $38.60 billion, year-on-year growth off a hair under 40%.

One area of intense focus is if the company sticks to its expense guidance for 2017. When Facebook reported for Q1, management said that investors should expects CapEx for 2017 of between $7 billion and $7.5 billion. In addition, management stated that they expect FY17 GAAP expenses will grow 45% (mid-point) over 2016 levels. Investors will be watching results to see if the company remains on track to remain in the guided range for expenses or will they raise the expense guidance for the second half of 2017.

Another area that will draw its share of scrutiny is momentum at Instagram. There is a lot of chatter (even today) that Instagram is now being favored over Snapchat by advertisers. Investors will want to see the numbers prove that chatter/speculation true when Facebook reports tonight. Incidentally, Snap is making a new all-time low as I write this article.

Wall Street analysts have stated that their checks/field checks/surveys have shown that ad trends are favoring Facebook and that the company has a strong tailwind going into the back half of the year.

Another area of investor scrutiny will be whether WhatsApp was blocked/partially blocked in China and how that will affect usage metrics going forward, if true.

Finally, investors will be looking for the company provide color on their recent decision to place ads on Messenger which should drive higher revenues for the company.

I have no skin in the game (this time around) but given the just under 40% rise in Facebook in the past year and the 44% rise in 2017, the risk/reward (long or short) is just not there for me.

Good luck however you are positioned going into Facebook's earnings report tonight, long, short or agnostic.

(no positions)

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