1"
"
!!Date:!April"3,"2015"
! ! ! Analyst!Name:!Brady"Arnone"and"CJ"Lee"
CIF!Stock!Recommendation!Report!(Spring!2015)"
Company!Name!and!Ticker:!Facebook"(FB)"
Section!(A)!Investment!Summary"
Recommendation!Buy:!!!!!!!Yes!!!!!!!!!" Target!Price:"93.80"
StopGLoss!Price:!!70.92"
Sector:!Technology" Industry:!Internet"Content"and"Information"
Market!Cap:!228.6B" #!of!Shrs.!O/S:!"2,799.01M"
Current!Price:"$81.56" 52!WK!Hi:!$86.07""
52!WK!Low:!$54.66" EBO!Valuation:!$87.10"
Morningstar!(MS)!Fair!Value!Est.:!!$66.00"
MS!FV!Uncertainty:"High"
MS!Consider!Buying:!!!"$39.60"
MS!Consider!Selling:"$102.30!!"
EPS!(TTM):!1.07" EPS!(FY1):!1.95" EPS!(FY2):!2.57" MS!Star!Rating:"2"stars"
Next!Fiscal!Yr.!End"!December"15,"2015"
Last!Fiscal!Qtr.!End:"Less!Than!8!WK:!!"
Y!!!!!!!!"
If!Less!Than!8!WK,!next!Earnings!Ann.!Date:"April"16,"2015"
Analyst!Consensus!Recommendation:"Outperform"
Forward!P/E:!31.74""
Mean!LT!Growth:!"31.87"
PEG:!1.00" Beta:!!!0.78"
%!Inst.!Ownership:"66.42%"
Inst.!OwnershipG!Net!Buy:!!!Y!!!!!!!"
Short!Interest!Ratio:!1.30"
Short!as!%!of!Float:!N/A"
Ratio!Analysis" Company" Industry" Sector"
P/E!(TTM)" 76.47" 38.96" 20.72"
P/S!(TTM)" 18.34" 8.90" 7.23"
P/B!(MRQ)" 6.33" 7.27" 5.28"
P/CF!(TTM)" 54.65" 29.97" 94.27"
Dividend!Yield" U" 0.56" 1.30"
Total!Debt/Equity!(MRQ)" 0.65" 52.18" 20.77"
Net!Profit!Margin!(TTM)" 23.58" 21.03" 8.55"
2"
"
ROA!(TTM)" 10.12" 11.69" 9.96"
ROE!(TTM)" 11.34" 22.37" 10.83"
"
Investment!Thesis""Pros"
● With"300"million"monthly"active"users"(MAUs)"who"on"average"spend"over"20"minutes"a"day"on"Instagram,"growth"is"expected"in"material"advertising."
● With"the"average"Instagram"user"ages"18U29"and"70%"of"users"outside"the"US,"advertisers"can"reach"different"markets"advertising"on"Instagram"than"Facebook"leading"to"growth"in"advertising"revenues."
● WhatsApp,"the"largest"messenger"app,"has"over"700"million"MAUs"which"is"attractive"to"advertisers"who"want"to"hit"a"large"audience"which"can"spike"advertising"growth"in"WhatsApp."
Cons"● May"be"overvalued"● Close"to"52"week"high"● Have"not"seen"much"money"
generated"from"WhatsApp."(Many"believe"Facebook"overpaid"for"WhatsApp)"
● Expenses"to"increase"by"55U70%"in"2015"
● Large"investments"in"“people,"products,"and"infrastructure”"
Summary"Provide"brief"summary"of"your"analysis"in"each"section"that"follows"Company!Profile:"Facebook,"Inc."operates"as"a"social"networking"platform"across"the"world."Facebook"provides"tools"and"application"programming"interfaces"that"enable"developers"to"integrate"with"Facebook"to"create"Web"and"mobile"applications."Fundamental!Valuation:"The"fundamental"valuation"calculated"for"Facebook"resulted"with"it’s"current"stock"price"being"fairly"valued."Our"implied"price"came"out"to"be"$87.10,"close"to"the"52"week"high."These"results"indicate"Facebook’s"strong"performance"in"recent"quarters"and"their"ability"to"sustain"growth."Relative!Valuation:"The"relative"valuation"we"found"to"be"contaminated"by"Twitter"and"Yahoo"inputs."The"mean"longUterm"growth"rate"close"to"75%"posted"by"Twitter"and"Yahoo’s"negative"growth"rate"distorted"our"results."This"valuation"does"not"accurately"illustrate"Facebook’s"financials."Google"and"LinkedIn"were"the"only"reasonably"close"comparables."Revenue!and!Earnings!Estimates:!Facebook"has"a"tendency"to"beat"analyst’s"estimates."Their"revenues"and"EPS"have"consistently"grown"over"the"years"and"show"no"signs"of"slowing"down."FB"has"beaten"on"sales"and"EPS"in"5"of"the"last"5"quarters."Analyst!Recommendations:!Analysts"have"a"mean"rating"of"1.73."This"is"a"very"good"indicator"that"analysts"are"bullish"on"Facebook."It"has"been"a"particularly"high"growth"stock"in"the"past"years"and"analysts"see"that."Of"the"51"analysts,"44"of"them"
3"
"
recommend"BUY"and"OUTPERFORM."
Institutional!Ownership:!The"institutional"ownership"of"FB"stock"is"around"55%."This"if"a"little"on"the"low"side"but"there"is"a"net"buyer"of"8"in"the"past"three"months."Only"FMR,"LLC"and"Vanguard"Group"have"institutional"ownership"of"over"5%."Short!Interest:!With"a"short"interest"ratio"of"1.30,"investors"are"bullish"on"the"stock."Investors"see"value"in"Facebook"and"are"not"shorting"selling"there"positions."When"compared"to"LinkedIn"and"Twitter"Stock!Price!Chart:!FB"has"continued"to"outperform"the"sector"and"index"along"with"its"competitors."In"the"1"year"chart,"FB"has"experienced"consistent"growth"and"better"performance"than"its"competitors."
"
Section!(B)! Company!Profile!"
(BG1)!Profile!"Facebook,"Inc."was"founded"in"2004"by"Mark"Zuckerberg"in"Menlo"Park,"California.""
Facebook,"Inc."operates"as"a"social"networking"platform"across"the"world."Facebook"provides"tools"and"application"programming"interfaces"that"enable"developers"to"integrate"with"Facebook"to"create"Web"and"mobile"applications"(finance.yahoo.com).""
Facebook’s"products"consist"of"the"Facebook"mobile"application"along"with"the"website"platform"that"allows"people"to"connect,"share,"discover,"and"communicate"with"each"other"through"mobile"devices"and"personal"computers."Facebook"Messenger"is"another"one"of"their"
products"that"is"a"mobileUtoUmobile"messaging"application"available"on"IOS,"Android"and"WIndows"phone"devices."They"also"own"Instagram"which"is"a"mobile"application"that"enable"people"to"take"photos"and"videos,"add"filters"to"customize"them,"and"share"them"with"their"friends"and"followers."Lastly,"Facebook"has"WhatsApp"Messenger,"a"crossUplatform"mobile"messaging"application"that"allows"
4"
"
people"to"connect"through"messages"to"several"devices"outside"the"ones"mentioned"above"(finance.yahoo.com).""
As"of"January"28,"2015,"Facebook"has"1.393"billion"monthly"active"users"and"890"million"active"daily"users."The"average"time"spent"on"Facebook"per"user"per"day"equates"to"21"minutes."31%"of"all"US"senior"citizens"have"Facebook"profiles"(expandedramblings)."About"98%"of"revenue"growth"is"in"mobile"ads,"representing"the"enormous"market"for"mobile"devices"(statista)."Above"is"a"chart"that"reveals"the"growth"in"mobile"ads"over"the"years."It"is"astonishing"to"see"how"much"mobile"advertising"has"grown"since"Q2"of"2012"where"mobile"ads"were"nonexistent"and"now"in"Q4"of"2014"they"amount"to"$2,500"million."Now,"looking"at"the"revenue"breakdown,"there"seems"to"be"an"enormous"growth"potential"abroad"in"Europe"and"Asia."According"to"the"table"above,"US"and"Canada"account"for"about"50%"of"total"revenue"with"19%"of"the"monthly"active"users."Users"are"more"active"in"Europe,"Asia,"and"the"rest"of"the"world"collaboratively"holding"the"other"50%"of"the"revenue"breakdown"and"81%"of"monthly"active"users"share"(statista)."
"
(BG2)!Revenue!and!Earnings!History"
"
5"
"
1) What!are!your!observations!on!revenue?!Was!there!a!notable!upG!or!downGtrend,!yearGoverGyear?!Was!there!seasonable!pattern?!!
In"observing"the"revenues"for"the"past"two"years,"there"has"been"steady"growth."There"was"only"one"quarter"(March"‘14)"where"revenues"did"not"beat"the"previous"quarter."Facebook"has"continually"grown"their"revenue"streams"over"the"past"couple"years"with"the"exception"of"that"one"quarter"where"revenues"decreased."I"do"not"notice"any"seasonal"patterns."Facebook"has"experienced"growth"in"all"of"the"quarters."
2) Likewise,!what!are!your!observations!on!earnings?!!!As"far"as"EPS,"Facebook"has"experienced"growth"from"quarter"to"quarter"as"well."However,"the"EPS"for"the"most"recent"quarter"was"down"a"little"but"has"managed"to"grow"over"the"previous"7"quarters."I"do"not"notice"any"seasonal"patterns"in"Facebook’s"EPS."They"have"experienced"continual"growth"in"all"quarters."Facebook’s"revenues"and"earnings"has"significantly"risen"from"FY"2013"to"FY"2014"with"the"exception"of"the"most"recent"quarter"EPS."
"
"
(BG3)!Most!Recent!Quarterly!Earnings!Release"
1) When!was!the!company’s!most!recent!earning!release?!! January"28,"2015""2) In!that!earnings!report,!was!reported!revenue!a!(1)!beat,!(2)!match,!or!(3)!miss!from!
consensus!estimate?!!! Revenue"reported"in"Q4"was"$385,000"which"beat"analysts"estimates""3) Likewise,!was!reported!earnings!a!(1)!beat,!(2)!match,!or!(3)!miss!from!consensus!
estimate?!!! Earnings"reported"in"Q4"was"$0.54"a"share"which"beat"analysts"estimates""4) What!did!the!management!attribute!the!beat/miss!to?!
Management"attributed"the"beat"in"earnings"to"growth"in"“size"and"engagement”"in"both"Facebook"and"Instagram."Zuckerberg"stated"in"the"Q4"earnings"call"how"Facebook"community"now"has"1.39"billion"people"who"use"it"monthly"and"890"million"people"who"use"it"daily."In"the"earnings"call,"they"also"mentioned"how"investments"in"WhatsApp"and"Oculus"have"added"value"to"their"company"and"they"expect"a"big"payoff"for"those"
6"
"
investments."Additionally,"Zuckerberg"stated"they"increased"their"headcount"by"45%,"preparing"for"future"growth.""
5) Did!the!management!provide!guidance!about!their!current!quarter!and!their!outlook!for!the!year?!What!were!the!key!points!of!the!guidance?!
Zuckerberg!spoke"briefly"about"their"outlook"for"the"year"and"how"they"want"to"continue"to"grow"the"Facebook"and"Instagram"communities"and"help"people"find"and"consume"content"they"like."Facebook,"in"the"past,"generally"only"had"text"content"shared."Currently,"photos"and"videos"are"what"is"shared"most"across"both"Facebook"and"Instagram"platforms."Facebook"expects"in"2015"to"continue"to"build"in"their"core"advertising"products"along"with"new"products"like"video"and"Instagram.""The"currency"exchange"also"was"mentioned"in"the"2015"outlook"in"the"earnings"call."Facebook"stated"they"expect"the"currency"headwind"to"increase"throughout"the"year."If"currency"rates"were"to"remain"frozen,"Facebook"estimated"their"total"revenues"would"decrease"by"5%"from"2014"total"revenue"results."Lastly,"expenses"are"expected"to"increase"between"55U70%"throughout"the"year"in"comparison"to"2014."Expenses"are"expected"to"increase"because"of"their"investments"in"“people,"products,"and"infrastructure”"
"6) How!did!the!stock!react!to!that!earnings!release?!
Even"with"the"top"and"bottom"line"beating"estimates,"the"stock"price"was"down"as"much"as"2.8%"after"hours"because"Facebook"predicted"its"GAAP"expenses"would"increase"anywhere"from"55%"to"75%"in"the"upcoming"year."Investors"did"not"react"well"to"the"announcement"of"higher"expenses"influencing"the"price"drop"even"with"a"good"earnings"report."
"
"
"
"
"
"
7"
"
"
Section!(C)! Fundamental!Valuation!(EBO)"
"
"
Inputs!(provide!below!input!values!used!in!your!analysis)"
"
EPS!forecasts!(FY1!&!FY2):! ! 1.95"and"2.57"
LongGterm!growth!rate:! ! 21.50%,"the"mean"estimate"was"31.87%""
The"mean"longUterm"growth"rate"was"31.87%"which"seemed"unrealistic"to"maintain"for"several"years."We"lowered"the"growth"rate"to"21.50%"which"was"the"“low”"estimate"which"still"is"fairly"high."I"adjusted"it"to"21.50%"because"of"the"growth"in"mobile"devices"and"advertising"FB"is"experiencing."98%"of"Facebook’s"revenues"come"from"mobile"advertisements"and"the"number"of"monthly"active"users"(MAUs)"has"grown"exponentially"and"shows"no"traces"of"turning"back."
8"
"
"Book!value!/share!(along!with!book!value!and!number!of!shares!outstanding):"
! Book!value:! ! ! 36,096"M"
! #!of!shares!outstanding:! 2,797"M"
! Book!value!/!share:! ! 12.905"
Dividend!payout!ratio:! ! 0%,"FB"does"not"issue"a"dividend"
Next!fiscal!year!end:! ! ! 2015"
Current!fiscal!month:!! ! 4,"April"
Target!ROE:! ! ! ! 20.43%"
"Discount!rate! ! ! ! "
Input!for!discount!rate:! 6.95%"
RiskGfree!rate:!! ! 2.53%"
Beta:! ! ! ! 0.74"
Market!risk!premium:! 8.5%"
Output"
Above!normal!growth!period!chosen:!4"
We"chose"4"years"as"our"above"normal"growth"period"because"of"how"fast"paced"the"technology"sector"is."This"sector"is"driven"by"innovation"and"as"long"as"companies"in"this"sector"keep"producing"new"products,"this"sector"will"continue"to"grow."Additionally,"the"mean"longUterm"growth"estimated"by"analyst"was"over"30%"which"illustrates"the"potential"for"sustained"abnormal"growth"for"Facebook."In"this"sector"there"is"a"lot"of"uncertainty"though"with"who"will"be"the"top"company"at"any"particular"time."With"that"being"said,"we"felt"4"years"was"a"better"representation"because"of"how"fast"things"can"change"in"this"sector."
"
EBO!valuation!(Implied!price!from!the!spreadsheet):!$87.10""
"
9"
"
1) Comment!on!the!fundamental!value!obtained!in!relation!to!the!stock’s!current!price!and!its!52Gweek!price!range.!!
The"fundamental"value"obtained"in"the"spreadsheet"supports"the"argument"that"Facebook"is"currently"fairly"valued."The"implied"price"of"$87.10"is"an"indicator"that"is"performing"well"right"now"and"has"consistently"grown"and"produced."The"52Uweek"high"is"$86.07,"and"with"an"investment"horizon"of"4"years,"$87.10"is"easily"attainable"for"this"high"growth"stock"in"a"growing"sector.""
2) What!might!be!“soft!spots”!of!the!inputs?!And!why?!The"soft"spots"in"this"valuation"may"include"the"longUterm"growth"rate"because"analysts"have"estimates"that"are">30%."This"growth"rate"seems"unattainable"and"definitely"would"be"shocking"to"see"a">30%"growth"rate"maintained"over"the"years."While"revenue"from"Instagram"and"mobile"advertising"are"going"to"expand"exponentially"in"the"coming"years,"WhatsApp"and"other"areas"of"revenue"cash"flows"are"going"to"remain"constant."Another"concern"in"the"valuation"is"the"beta."The"beta"was"found"on"both"yahoo.finance.com"and"msn.money.com"to"be"0.74"while"the"industry"and"sector"recorded"a"higher"beta"of"0.94"and"0.95."Right"now,"analysts"estimate"Instagram"advertising"revenue"to"grow"to"$1bn"by"2017."This"particular"expansion"in"Instagram"traffic"provides"great"ad"revenue"opportunities"for"growth"in"Facebook."We"believe"Facebook’s"beta"should"potentially"be"closer"to"the"industry"and"sector"betas."
!""
Sensitivity!Analysis"
1) Explain!the!input!values!used!in!sensitivity!analysis.!Compare!the!fundamental!values!obtained!here!in!relation!to!the!value!from!the!base!case!!
The"values"used"in"the"sensitivity"analysis"composed"of"mainly"the"longUterm"growth"rate"and"the"beta."When"these"numbers"were"changed"to"number"more"closely"related"to"the"industry,"the"implied"price"was"volatile."These"inputs"were"obtained"through"analyst"estimates"and"predictions."The"slight"changes"in"both"inputs"did"have"a"significant"impact"on"the"implied"price"both"producing"higher"implied"prices."
2) Other!observations!worth!noting!It"is"worth"noting"some"of"the"industry"and"sector"averages"applied"to"the"valuation"might"not"be"a"good"representation"of"Facebook’s"current"standing."Facebook"has"
10"
"
extremely"large"brand"awareness"and"because"their"applications"directly"apply"to"the"consumers,"several"other"tech"companies"who"are"software"oriented"do"not"have"the"recognition"and"growth"potential"Facebook"does."
"
EBO!valuation!would!be!(you!can!include!more!than!one!scenario!in!each!of!the!following):"
$129.13"if!changing!above!normal!growth!period!to!7"years"
$108.73"if!changing!growth!rate!from!mean!to!the!highest!estimate!of!47.10%"
$87.10"!if!changing!growth!rate!from!mean!(consensus)!to!the!lowest!estimate!21.50%"
$94.47!if!changing!discount!rate!to!8.0%"
$149.54"if!changing!target!ROE!to!30%"(50%"increase)"
"
"
Section!(D)! Relative!Valuation"
"
"
1) Discuss!various!valuation!multiples!of!your!stock!and!its!peers.!Comment!if!any!of!these!stocks!have!multiples!far!off!from!the!others!and!explain!whether!it!makes!sense.!!
Facebook"has"a"Forward"P/E"of"31.74,"a"PEG"ratio"of"1.00,"and"a"value"ration"of".56."Twitter"has"a"U17.57%"ROE"U"5Uyear"average"that"does"not"reflect"the"other"ROE"average"inputs"from"the"other"competitors."Twitter"also"has"an"extremely"high"mean"longUterm"growth"rate"of"74.80%,"which"is"an"outlier"in"comparison"to"FB,"and"the"rest"of"the"
11"
"
competitors."Google"has"a"much"lower"Forward"P/E"ratio"of"16.06"with"Facebook"being"the"next"closest"at"31.74.""
We"excluded"Yahoo’s"negative"PEG"from"the"mean"because"the"ratio"did"not"accurately"represent"the"comparables."We"also"decided"to"take"out"Twitter’s"value"ratio"out"of"the"mean"because"it"was"negative"as"well"versus"all"the"other"competitors"within"a"reasonable"range."
The"relative"valuation"was"full"of"discrepancies"with"much"of"the"data"providing"inaccurate"results"because"of"all"the"volatility"in"values."This"valuation"might"not"be"the"best"representation"of"FB’s"current"situation."
"
2) Discuss!the!various!implied!prices!of!your!stock!derived!from!peers’!(“Comparables”)!multiples.!Compare!these!implied!prices!to!current!price!and!52Gweek!high!and!low.!How!different!are!the!prices!derived!from!the!various!valuation!metrics?!Note!any!valuation!metrics!that!seem!to!yield!outlier!prices!and!explain!whether!it!makes!sense.!!
The"implied"prices"derived"from"Facebook’s"competitors"seem"to"undervalue"Facebook"relative"to"their"current"stock"price."Using"the"Forward"P/E"ratios,"the"implied"price"from"Yahoo"is"similar"to"the"implied"price"found"in"the"fundamental"valuation."This"is"favorable"for"FB"when"using"competitors"Forward"P/E"to"calculate"implied"price"because"it"illustrates"the"possibility"for"growth"in"FB."The"implied"prices"exceed"FB’s"52"week"high"by"at"a"minimum"of"45%"(Yahoo’s"implied"price"at"$126.07),"implying"there"is"room"for"growth.""
When"discussing"the"PEG"ratios"used"to"calculate"the"implied"prices,"using"Yahoo’s"PEG"recorded"a"price"of"approximately"U$300.00."We"found"this"to"very"irrelevant"because"Yahoo"is"not"that"similar"of"a"competitor"and"does"not"directly"relate"with"Facebook’s"business"model"and"the"services"they"provide."When"using"Google’s"PEG,"the"implied"price"was"calculated"to"be"around"$82"well"in"the"range"of"FB’s"52"week"high"and"low."We"did"find"the"implied"prices"calculated"by"our"competitors"PEG’s"were"a"bit"sporadic."There"were"some"implied"prices"extremely"low"(Yahoo)"and"the"others"were"inconsistent"compared"to"each"other."
"
"
12"
"
3) Compare!your!findings!with!comments!from!analysts!from!Morningstar*Direct!and!other!online!resources.!!
Morningstar’s"analyst"calculated"a"fair"value"estimate"of"$66.00,"marking"that"FB"is"overvalued"at"this"point"in"time."In"the"relative"valuation,"we"found"Facebook"to"be"fairly"valued"with"implied"prices"at"FB’s"52"week"high"with"the"exception"of"using"Yahoo’s"financials."
!
Section!(E)!!!!Revenue!and!Earnings!Estimates!
(EG1)!!!!!
Facebook has a tendency to beat estimates over the years. Their revenue and EPS has been growing constantly, from $2585M to $3851M and $0.31 to $0.54. From the table, we can see that Facebook made both positive surprise in revenue and EPS for all recent 5 quarters. Looking at revenue, Facebook made a big surprise in quarter ending December 2013 with 10.94%
13"
"
difference. After that, surprise percentage has been decreased but still made positive surprise. EPS has been going up and down in positive side, and made a big surprise in quarter ending June 2014 with 30.56%. Their stock price has been increasing with positive surprises news.
!(EG2)!!!!
Percentage Difference from High Estimate from Mean (Revenue)
Q1: 6.7% Q2: 6.6% FY1: 5.1% FY2: 12.7%
14"
"
Percentage Difference from Low Estimate from Mean (Revenue)
Q1: 13.8% Q2: 7.5% FY1: 8.4% FY2: 18.7%
Percentage Difference from High Estimate from Mean (EPS)
Q1: 21.7% Q2: 14.3% FY1: 15.4% FY2: 14.8%
Percentage Difference from Low Estimate from Mean (EPS)
Q1: 35.3% Q2: 19.5% FY1: 18.2% FY2: 32.5%
As you can see from above, there is a much larger divergence between current quarter and FY2 estimates for revenues, and earnings. Out quarter and FY1 had not much of differences compare to current and FY2. Also, there were only 13 analysts for the LT growth rate (%), which is less than 1/3 of analysts in revenue and EPS.
!
!
!
!
!
!
!
!
!
!
!
!
!
15"
"
(EG3)!!!
Review!recent!trend!of!analysts’!consensus!(mean)!estimates!on!revenue!and!earnings.!(1)!Are!the!consensus!estimates!trending!up,!down,!or!stay!the!same?!(2)!Is!the!trend!more!!notable!for!the!nearG!or!outG!quarter,!FY1!or!FY2,!revenue!or!earnings?!
!"For"the"Revenue"part,"estimates"are"trending"upwards"if"we"compare"with"a"year"ago"data,""but"if"we"compare"with"2month"ago"data,"it"went"up"just"slightly,"and"for"the"Earnings"part,"if"we"compare"with"a"year"ago"data,"estimates"are"trending"upwards"and"recent"numbers"did"not"change"at"all."The"changes"are"more"noticeable"for"the"FY1"and"FY2"in"both"Revenues"and"Earnings."!
!
!
!
16"
"
(EG4)!!!!
Review!the!number!of!analysts!revising!up!or!down!their!estimates!(both!revenue!and!earnings)!in!the!last!and!last!four!weeks.!(1)!Note!whether!there!are!more!up!or!down!revisions;!(2)!are!the!revisions!predominantly!one!directional?!(3)!Any!notable!difference!last!week!versus!last!four!weeks,!revenue!versus!earnings?!
For Revenue, we can see that 8 analysts made “up” revisions in last 4weeks and 6 made “down” revisions, and there were no revision from analysts in last week. For Earnings, 8 made “up” revisions and 7 made “down” revisions in last 4 weeks, and 1 “up” and 3 down in last week. We can see that there were some revisions going on during last 4 weeks, but total revision of “up”s were larger than “down”s.
!!!!
17"
"
(EG5)!!!!
1. Make!note!of!the!company’s!(1)!last!earnings!reporting!date,!and!(2)!next!earnings!reporting!date.!"Facebook’s"last"earnings"report"was"on"January 28,"2015"and"next"earning"report"will"be" released"on"April"22,"2015.!
2. Review!revisions!day!by!day,!and!comment!on!(1)!whether!they!tend!to!be!clustered,!and!(2)!if!clustered,!were!they!near!earnings!reporting!date?!NO!REVISION!
3. Were!there!any!greater!than!10%!consensus!revisions?!What!is!the!maximum!%!consensus!revision?!NO!REVISION!
4. Observe!stock!price!chart,!how!did!the!stock!trade!around!dates!of!greater!than!10%!consensus!revisions?!NO!REVISION!
5. Other!observations!worth!noting?!NO!REVISION!
!
Section!(F)!!!!Analysts’!Recommendations
1. Review!the!trend!of!analyst!recommendations!over!the!last!three!months.!Is!there!a!notable!change!of!analyst!opinions,!turning!more!bullish!or!bearish?!!
Over"the"past"three"months"there"has"been"no"notable"change"of"analyst"opinions.""
18"
"
2. How!many!different!ratings!out!of!the!five!possible!ones!did!the!company!receive!currently,!one,!two,!and!three!months!ago?!!
Currently,"22"analysts"say"BUY,"22"analysts"say"OUTPERFORM,"and"6"analysts"say"HOLD"and"1"analyst"say"UNDERPERFORM."Total"numbers"of"analysts"have"been"growing"from"47"to"51,"and"number"of"analysts"recommending"BUY"has"increased."
3. Is!there!a!notable!trend!of!opinion!convergence!or!divergence?!!There"has"been"no"notable"trend"of"opinion"except"for"that"all"the"opinions"have"remained"perpetually"the"same."
!4. Cross!check!(1)!Morningstar!analyst’s!research!report;!and!(2)!media!or!other!analysts’!
comments!from!online!financial!sites.!Is!what!you!see!here!consistent!to!comments!elsewhere?!
In"comparison"with"Yahoo"finance,"17"say"Strong"Buy,"26"say"Buy,"6"say"hold"and"1"say"underperform."In"accordance"with"CNBC,"17"say"Strong"Buy,"23"say"Buy,"6"say"Hold"and"1"say"Underperformed."Most"of"financial"sites"suggest"similar"analysts’"recommendations"with"Buy."
5. Other!observations!worth!noting?!Different"media"uses"different"scales"and"measurements,"so"there"is"no"right"and"wrong"about"data"we"get"from"CNBC,"Morningstar,"Reuter"and"etc.
(FG2)!Most!Recent!One!Month!Analysts!Upgrades/Downgrades!from!CNBC! Go!to!http://www.cnbc.com/,!“news”,!“earnings”,!“calendar”,!“upgrades”!and!“downgrades”.
1. Make!note!of!the!company’s!(1)!last!earnings!reporting!date,!and!(2)!next!earnings!reporting!date.!!
Facebook's last earnings report was on January 28, 2015 and next earning report will be released on April 22, 2015.!
!2. Add!up!the!number!of!upgrades!on!weekly!basis.!Do!the!same!for!downgrades.!Were!
there!more!upG!or!downGgrades?!Were!there!any!consistent!trend!you!observe!in!the!recent!month?!Were!there!any!upG!or!downGgrades!of!more!than!“one!grade”?!NO!REVISION!
3. Were!there!clustering!of!upG!or!downGgrades?!If!so,!were!they!clustered!around!earnings!report!date?!NO!REVISION!
4. Observe!stock!price!chart,!how!did!the!stock!trade!around!dates!of!upG!or!downGgrades?!NO!REVISION!
5. Other!observations!worth!noting?!NO!REVISION!
19"
"
!Section!(G)!!!!Institutional!Ownership!!
!!
!
20"
"
1. Whether!institutions,!on!net!basis,!have!been!increasing!or!decreasing!ownership!and!whether!the!change!can!be!considered!as!substantial!
The"number"of"net"buyer"has"been"increased"recently."The"three"month"net"change"was"+8,"which"concludes"that"there"has"been"slightly"more"increased"positions"than"decreased"positions."This"change"won’t"be"that"substantial.""2. Whether!the!stock!has!sizable!institution!interests/support!Institutional"investors"own"over"54%"of"Facebook,"which"is"an"indication"that"institutions" see"value"in"investing"in"Facebook."Also"FMR"holds"over"6.38%"which"means"they"are"expecting" Facebook"to"grow.""3. The!extent!of!the!(>!5%)!owners!by!adding!up!all!>5%!ownership,!and!make!an!effort!to!identify!those!that!are!mutual!funds.!!
!"There"are"no"mutual"funds"that"hold"over"5%"ownership."Fidelity"Contrafund"has"largest"percentage"with"2.09"and"Vanguard"with"1.59%."SPDR"has"around"1"percent"and"next"fund"holders"with"less"than"1"percent.!!
!
!
!
!
!
21"
"
Section!(H)!!!!Short!Interest! (HG1)!!!!Short!Interest!Data!from!http://www.nasdaq.com/!(NASDAQ’s!website)
Facebook!
22"
"
23"
"
24"
"
(HG2)!Short!Interest!Data!From!http://finance.yahoo.com/
Avg Vol Avg Vol Shares Float (3 month) (10 day) Outstanding
22,128,600 25,888,500 2.80B 2.04B
Shares Short Short Ratio Short % of Float Shares Short (as of March 13,2015) (as of March 13,2015) (as of March 13,2015) (Prior Month)
"33.19M "1.30 N/A "28.85M
Avg Vol Avg Vol Shares Float (3 month) (10 day) Outstanding
20,918,300 23,882,500 637.43M 544.11M
Shares Short Short Ratio Short % of Float Shares Short (as of March 13,2015) (as of March 13,2015) (as of March 13,2015) (Prior Month)
"25.94M 1.70 6.60%" 26.53M"
Avg Vol Avg Vol Shares Float (3 month) (10 day) Outstanding
1,468,180 921,712 125.12M 108.53M
Shares Short Short Ratio Short % of Float Shares Short (as of March 13,2015) (as of March 13,2015) as of March 13,2015) (Prior Month)
4.90M" 3.80" 4.70%" "4.73M
25"
"
1. Make!note!of!the!company’s!(1)!last!earnings!reporting!date,!and!(2)!next!earnings!reporting!date.!
Facebook’s"last"earnings"report"was"on"January 28,"2015"and"next"earning"report"will"be" released"on"April"22,"2015.!
"2. Discuss!market!sentiment!on!the!stock!based!on!the!short!interest!statistics,!recent!
trend!reported!in!in!(HG1)!and!(HG2)?!Has!the!sentiment!turned!more!bullish!or!bearish!over!the!last!year?!How!about!in!more!recent!month!and!why?!
Facebook"has"lower"short"ratio"compare"to"Twitter"and"LinkedIn"with"1.30."Since"higher"ratio"represents"bearish"and"lower"ratio"represents"bullish,"we"can"see"that"Facebook"is"doing"really"well"compare"with"competitors,"because"it"has"more"number"of"share"outstanding"compare"to"competitors"and"still"has"lower"short"ratio."
!3. From!(HG1),!observe!“short!interest”!and!“#!of!days!to!cover”!values!for!two!reporting!
dates!immediately!before!and!one!reporting!date!immediately!after!earnings!report.!(1)!Were!there!notable!increase!or!decrease!in!the!values,!right!before!or!right!after!earnings!report?!(2)!Observe!stock!price!chart!and!comment!on!how!stock!traded!around!those!dates.!!
When"observing"the"short"interest"and"#"of"days"to"cover"surrounding"the"release"of" earnings,"we"noticed"that"short"interest"increased"by"2,720,703,"but"still"#"of"days"to"cover" was"1.073"which"is"relatively"low."After"two"weeks,"short"interest"has"been"going"down" continuously"which"signals"that"Facebook"is"bullish"and"doing"well." However, short interest went back up to 33,187,033 on 3/13/2015(Settlement Date).!
!
!
!
!
!
!
!
!
!
!
!
26"
"
Section!(I)!!!!Stock!Charts!For!
!(IG1)!–!(IG3),!the!stock!price!charts!should!include!(1)!your!stock,!(2)!1!competitor,!(3)!sector!ETF,!and!(4)!SP500!
!(IG1)!!!!A!three!months!price!chart
(IG2)!!!!A!one!year!price!chart
!
27"
"
(IG3)!!!!A!five!year!price!chart!
1. (IG1)!–!(IG3)!!!!Discuss!what!you!observe!from!the!above!stock!price!charts.!This!should!include!comparing!your!stock!to!competitors,!sector,!and!SP500!over!the!three!different!time!horizons.!!
By"looking"at"price"charts,"we"can"see"that"S&P500"and"the"technology"sector"(XLK)"have"followed"similar"courses."Facebook"has"been"underperformed"compare"to"the"technology"sector"and"S&P500"until"2014,"but"after"that"it"has"been"outperformed"most"of"the"time."Compare"to"Twitter,"Facebook"has"been"doing"relatively"well,"but"from"February"2015,"Twitter"has"been"outperforming"Facebook"for"2"months"now."
!
!!!!!!!!
28"
"
(IG4)!!!!!Technical!Indicators!(“Moving!Average”!and!“Relative!Strength!Index”!from!https://www.google.com/finance?tab=we ShortGterm!moving!average!and!relative!strength!index!indicators
"""!!!!!!!
29"
"
LongGterm!moving!average!and!relative!strength!index!indicators!
!
1. Discuss!your!findings!from!these!sets!of!technical!indicators.!Compare!your!findings!here!to!findings!from!fundamental!analysis.!Are!findings!from!technical!analysis!supportive!of!your!other!findings?!
The"Simple"Moving"Average"(SMA)"chart"represents"the"momentum"and"objectivity"that"Facebook"has"been"experiencing"over"the"years."In"both"the"long"and"short"term"the"Simple"Moving"Average"have"an"upward"slope"that"illustrates"the"rise"in"stock"price."Facebook"has"continually"been"above"the"SMA’s"in"the"long"term"making"investor"confident"the"upward"trend"will"continue."In"the"short"term,"there"is"more"volatility"but"the"stock"price"repeatedly"crosses"above"the"SMA"and"is"currently"little"bit"below"the"moving"average."
!
30"
"
Works!Cited!!
http://expandedramblings.com/index.php/byGtheGnumbersG17GamazingGfacebookGstats/
http://www.statista.com/chart/2496/facebookGrevenueGbyGsegment/
http://www.reuters.com/finance/stocks/overview?symbol=FB.O
http://finance.yahoo.com/q?uhb=uh3_finance_vert&fr=&type=2button&s=fb!
http://www.nasdaq.com/symbol/fb/short-interest http://finance.yahoo.com/q/ks?s=FB+Key+Statistics
https://www.google.com/finance?q=NASDAQ%3AFB&ei=c_giVZHlIueKjALvlIDoAg http://data.cnbc.com/quotes/FB/tab/4
http://investor.fb.com/index.cfm "
