Facebook Inc (NASDAQ:FB) Earnings Model
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Models From Our Community
Last Updated: January 13, 2017 (prior to the 4Q16 release)
View on Facebook: Bearish Price Target: $108 Model Up Votes-to-Total Votes: 50% Summary of Model Estimates: With all the analyst upgrades on Facebook this week ahead of the fourth quarter release, now is the perfect time to short shares. Ad load has gotten out of hand and management knows it. This is why they warned on revenue growth rates early in 2016. In my Facebook model, I adjusted ARPU for each region to be inline with last year’s rates. This results in a share valuation of $108, which is about 15% lower than then Friday’s close without adjusting the PE-multiple.
Last Updated: January 16, 2017 (prior to the 4Q16 release)
View on Facebook: Bullish Price Target: $138 Model Up Votes-to-Total Votes: 50% Summary of Model Estimates: I think Facebook will surprise on improvements in price per ad in 2017 driven by better relevancy and the continued shift into video. I have reflected this view in my model by increasing the ARPU in 2017 from about $12 in 2015 and $16 in 2016, to $20 in 2017. I also think that if management is able to execute on price per ad the market will reward shares with a higher PE-Multiple so I have increase it to 25x on an exCash basis.
Facebook Modeling ApproachRevenue Modeling Approach: This model uses Monthly Active User growth rates and Average Revenue Per User to project future Revenue. We have also added a section for our users to make assumptions about Oculus Rift sales, although this product is not a meaningful contributor to earnings yet.
Expense Modeling Approach: To estimate Cost of Revenue we use forecasts of Gross Margin percentage, and use ratios to project the operating expense line items. We use historic averages to estimate Interest & Other Income, and apply an effective tax rate to the future projected income to forecast the Provision for Income Tax. Non-GAAP Adjustments: We include Non-GAAP adjustments for Share-Based Comp (SBC), and amortization of Intangibles (allocated to Cost of Revenue and Operating Expenses based on the prior quarter’s allocation), and the tax impact of non-GAAP items (applied to Net Income). Share Count Forecast: To forecast the future share count we calculate the historic change in share count, and apply similar changes in future periods. Balance Sheet & Cash Flow Modeling Approach: We use operating ratios to project the primary accounts on the Balance Sheet, and Balance Sheet changes and earnings estimates to forecast the Cash Flow Statement. Valuation Approach: We utilize two valuation methods: A Market Multiple-based approach, and a Discounted Cash Flow (DCF) valuation. We apply a Price-Earnings Multiple to the Next Twelve Month consensus EPS estimate, on an exCash basis. Our DCF is based on a two-stage approach which discounts the company’s expected cash flows using our estimate of the Weighted Average Cost of Capital. |
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