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Ahead of Q3 Earnings, Facebook (FB) Remains a Strong Growth Stock

One day before Facebook FB is set to post its third-quarter earnings, representatives from the social media giant will testify in front of the Senate Judiciary Committee on Tuesday regarding Russia’s role in buying controversial election-related Facebook posts.

Still, despite all of the legitimate Russian concerns, along with the possibility of future government intervention and more stringent self-regulation, Facebook is an amazing growth stock.

As almost every investor knows, Facebook has been on a meteoric rise since going public. It has become—along with other tech powers like Amazon AMZN—one of the companies that growth-focused investors point to as the reason they search for outsized growth potential over many other factors.

Growth investing is often seen as more exciting, with the added possibility of massive returns compared to many value-minded strategies. Some investors might think that Facebook is past the point of being a growth stock, but that is hardly the case.

Facebook is currently a Zacks Rank #1 (Strong Buy) and sports and an “A” grade for Growth in our Style Scores system. Now, one day before Mark Zuckerberg’s company announces its Q3 earnings, let’s take a look at some of its growth-based fundamentals.


Recently, Deutsche Bank DB mentioned to investors that Facebook could be set to experience a 42% year-over-year jump in advertising revenue. Advertising revenues are something all Facebook investors should pay close attention to, as selling ads is how Facebook makes a majority of its money. The Deutsche Bank note also mentioned that the social media giant has continued to invest heavily in video content, which could help drive further long-term growth.

The Zacks Consensus Estimates also help to show potential Facebook investors that its growth prospects are as strong as ever.

Facebook revenues are projected to surge almost 41% in the third quarter, based on our current consensus estimates. For its full fiscal year, the company’s revenues are set to soar 42% to reach an upward estimate of $40 billion.

These massive revenue growth projections are something that investors should be relatively giddy about, especially for a company of Facebook’s size. On top of Facebook’s top-line growth, the company’s earnings are set to jump as well.

Facebook’s earnings are set to gain almost 19% in Q3. For the full fiscal year, Facebook’s earnings are set to pop over 26% to reach $5.35 per share.

And a couple of key factors might help boost investor confidence in Facebook’s ability to match or top Q3 and full-year projections. First, Facebook has received 11 upward earnings estimate revisions for its third-quarter, all within the last 60 days. During this same timeframe, the company has earned 12 positive revisions for its full-year earnings against no downward changes.

What’s more, Facebook has topped earnings estimates in each of the trailing eight quarters.

Facebook, Inc. Price, Consensus and EPS Surprise

Facebook, Inc. Price, Consensus and EPS Surprise | Facebook, Inc. Quote

Shares of Facebook have climbed over 56% since the start of the year. This movement destroys both the S&P 500’s 12.58% growth and the “Internet – Services” industry’s average.

Facebook did touch a new 52-week high on Tuesday, as it prepares to report Q3 earnings. This might make some investors cautious about jumping on Facebook right now, but if the social media company beats or matches its third-quarter projections, shares of Facebook could easily cruise to new highs for weeks to come.

It seems relatively clear that investors with growth on their minds might look no further than one of the biggest tech companies in the world.

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