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The Zacks Analyst Blog Highlights: Facebook, Silicon Motion Technology, Equifax and GoDaddy

For Immediate Release

Chicago, IL – April 25, 2016 – announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include Facebook, Inc. (FB), Silicon Motion Technology Corp (SIMO), Equifax Inc. (EFX) and GoDaddy Inc. (GDDY).

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Here are highlights from Friday’s Analyst Blog:

Can Facebook Keep Its Earnings Streak Alive in Q1?

Facebook, Inc. (FB) is set to report first-quarter 2016 results on Apr 27. The company had reported a positive earnings surprise of 18.00% in the last quarter. It has also delivered an average positive earnings surprise of 3.37% over the trailing four quarters. Let’s see how things are shaping up for this announcement.

Things to Watch Out for this Time

Investors will keep an eye on online and mobile advertising revenues in the first quarter earnings release. Facebook has gained significant traction in its mobile ad business within a very short span of time. Mobile monetization has increased with a higher number of marketers, continuing investment in new products and robust performance of its newsfeed ads. This combined with its massive user base and its ability to track personal details over time, make it a formidable force in the online ad market. Notably, in the fourth quarter, mobile ad revenues grew 81% to $4.5 billionrepresenting 80% of total ad revenue.

After opening its ad platform to worldwide advertisers six months back, Instagram has emerged as an important cash cow for Facebook. Though management did not provide the exact numbers for the fourth quarter of 2015, it seemed the ad platform was well received as reflected in increases in both overall ad impressions and average ad prices. Average price per ad increased 21% from the year-ago quarter and ad impressions grew 29%, due to increases in mobile impressions. Investors will once again be focused on Instagram’s money minting abilities to boost overall ad revenues for the company.

As per an analyst, Instagram will generate $572.5 million revenues in the first quarter, taking total 2016 revenues to a whopping $3.2 billion. Notably, Facebook was subject to severe ridicule when it acquired the snazzy photo sharing app in 2012 for a billion dollars. Apart from Instagram, Oculus, Messenger and WhatsApp have been labeled as multibillion dollar opportunities. Facebook is now working aggressively to monetize these platforms.

User growth numbers will also be in focus. With gargantuan 1.59 billion users, Facebook is the largest social media platform. Facebook’s Monthly Active Users (MAU) and Daily Active Users (DAU) have also crossed the billion mark. In the fourth quarter, even Mobile DAUs grew 25% year over year to an impressive 934 million. Moreover, WhatsApp boasts over 1 billion users whereas Messenger recently crossed the 900 million user mark. With user base already at sky high levels, growth is eventually and imminently headed for a relative slowdown.

Long Term Opportunities

At its F8 developer conference concluded recently, Facebook has more than ever clearly highlighted its ambitions of becoming more than just a social network. The social media giant outlined its plans for the next decade, which is all about going full throttle with AI and AR/VR technology. Messenger was again the key topic of discussion at the conference with all talks of chatbots and “conversational commerce”. We believe CEO Mark Zuckerberg will eventually bring “conversational commerce” to WhatsApp as well.

Though Facebook stumbled a bit with the initial shipments of its VR headsets, Oculus Rift, hitting a roadblock. However, this is unlikely to deter Facebook ambitious plans. An analyst observes that Rift has the potential to “handsomely” pay off the $2 billion investment that Facebook made for acquiring Oculus two years back. He expects Facebook to sell 600,000 units this year and another 2 million plus units equaling to over $1.6 billion in revenues in the 2017.

As of now, all of these appear to be terrific growth engines but it will be one Herculean task for the company to actually make all of them work. Moreover, intensifying competition for users & ad dollars and increasing investments threatens to thwart its growth prospects.

Earnings Whispers

Our proven model does not conclusively show that Facebook is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. That is not the case here as you will see below.

Zacks ESP: Facebook has an Earnings ESP of -2.27%. This is because the Most Accurate estimate stands at 43 cents while the Zacks Consensus Estimate is pegged higher at 44 cents.

Zacks Rank: Facebook has a Zacks Rank #2 (Buy), which increases the predictive power of ESP. But we need to have a positive ESP to be confident of an earnings beat.

Please note that we caution against stocks with Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Stocks to Consider

Here are a few stocks that, as per our model, have the right combination of elements to post an earnings beat this quarter:

Silicon Motion Technology Corp (SIMO), with an Earnings ESP of +7.27% and a Zacks Rank #1 (Strong Buy).

Equifax Inc. (EFX) with an Earnings ESP of +1.75% and a Zacks Rank #2.

GoDaddy Inc. (GDDY) with an Earnings ESP of +33.33% and a Zacks Rank #2.

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FACEBOOK INC-A (FB): Free Stock Analysis Report
SILICON MOTION (SIMO): Free Stock Analysis Report
EQUIFAX INC (EFX): Free Stock Analysis Report
GODADDY INC-A (GDDY): Free Stock Analysis Report
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