Facebook (FB) Dips More Than Broader Markets: What You Should Know

Zacks Equity Research
·3-min read

Facebook (FB) closed the most recent trading day at $261.40, moving -1.7% from the previous trading session. This move lagged the S&P 500's daily loss of 1.63%. Elsewhere, the Dow lost 1.44%, while the tech-heavy Nasdaq lost 1.65%.

Prior to today's trading, shares of the social media company had gained 4.36% over the past month. This has lagged the Computer and Technology sector's gain of 5.81% and outpaced the S&P 500's gain of 2.86% in that time.

FB will be looking to display strength as it nears its next earnings release, which is expected to be October 29, 2020. In that report, analysts expect FB to post earnings of $1.92 per share. This would mark a year-over-year decline of 9.43%. Meanwhile, the Zacks Consensus Estimate for revenue is projecting net sales of $19.77 billion, up 11.97% from the year-ago period.

For the full year, our Zacks Consensus Estimates are projecting earnings of $8.11 per share and revenue of $80.63 billion, which would represent changes of +26.13% and +14.04%, respectively, from the prior year.

It is also important to note the recent changes to analyst estimates for FB. Recent revisions tend to reflect the latest near-term business trends. As such, positive estimate revisions reflect analyst optimism about the company's business and profitability.

Research indicates that these estimate revisions are directly correlated with near-term share price momentum. To benefit from this, we have developed the Zacks Rank, a proprietary model which takes these estimate changes into account and provides an actionable rating system.

The Zacks Rank system, which ranges from #1 (Strong Buy) to #5 (Strong Sell), has an impressive outside-audited track record of outperformance, with #1 stocks generating an average annual return of +25% since 1988. Within the past 30 days, our consensus EPS projection has moved 0.25% higher. FB is currently sporting a Zacks Rank of #3 (Hold).

Valuation is also important, so investors should note that FB has a Forward P/E ratio of 32.77 right now. Its industry sports an average Forward P/E of 38.64, so we one might conclude that FB is trading at a discount comparatively.

We can also see that FB currently has a PEG ratio of 1.74. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. The Internet - Services was holding an average PEG ratio of 2.16 at yesterday's closing price.

The Internet - Services industry is part of the Computer and Technology sector. This group has a Zacks Industry Rank of 189, putting it in the bottom 26% of all 250+ industries.

The Zacks Industry Rank gauges the strength of our individual industry groups by measuring the average Zacks Rank of the individual stocks within the groups. Our research shows that the top 50% rated industries outperform the bottom half by a factor of 2 to 1.

You can find more information on all of these metrics, and much more, on Zacks.com.


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