Flickr

Facebook Inc. (NSDQ:FB) is scheduled to report its Q3 2016 earnings on November 2, after the market close. Wall street expects the company to report an EPS (Earnings Per Share) of 97 cents on revenue of $6.92B, implying a 70% YoY growth in earnings and 50% expansion in the top line. Facebook has beaten analyst estimates in each of the last 4 quarters, delivering strong growth in revenue as well as earnings, reflecting in the rise in Facebook stock price, which is up 24% in the year-to-date, closing the last trading session at $132 per share. Will the upcoming earnings report add fuel to accelerate the further rise of Facebook stock?

Facebook Stock Is Riding A Bullish Wave

A number of Wall Street analysts have recently hiked their targets for Facebook stock. Credit Suisse analyst Stephen Ju had, last week, upped his target for FB stock to $170 from $154. In a more recent investor note, Goldman Sachs analyst Heather Bellini reiterated a 'Buy' rating on the stock with a price target of $162. The result has been a consistent uptick in the analyst consensus price target, which is currently at $156.76, up from $144.3 three months ago. The bullish sentiment around Facebook stock is also reflected in investor sentiment. As per the popular stock-specific social platform, Stocktwits, 76% percent of investors are bullish on Facebook stock.

Facebook Q3 2016 Analyst Estimates

Wall street expects Facebook to report EPS of 98 cents on top line of $6.92B, implying a 72% YoY growth in earnings and 54% revenue growth compared to Q3 2015. The analyst consensus has risen significantly, up from expectations for 87 cents in EPS on $6.6B revenue at the end of July. That's a 12.6% rise in EPS estimates and a 5% rise in the revenue estimates in just 3 months. The earnings whisper number anticipates Facebook to report an EPS of $1.03, good for a 5 cent earnings surprise, implying an 81% YoY EPS growth. As covered in our recent post, strong growth in advertiser spends and the expansion of the Facebook advertiser network make earnings beat highly probable.

Facebook Earnings History and Post-earnings Stock Performance

Facebook has a very strong track record of beating analyst estimates, having come out on top in 15 out of the 17 earnings reports the company has released since its IPO. The company has delivered an earnings surprise in each of the last 4 quarters, with an average earnings surprise of 19.4%. Facebook stock has traded strongly following earnings announcements, with the stock rising by an average 7.17% in the one trading session following the last 4 earnings reports.  Hence, a beat/miss on the Q3 2016 numbers on November 2 could well decide the post-earnings movement of Facebook stock.

(Click on image to enlarge)

Conclusion

Wall Street is increasingly bullish on Facebook stock, which has been reflected in the rising analyst consensus price targets. The stock is also enjoying a positive sentiment from investors/traders. Strong investor sentiment, Facebook's history of huge earnings beats and recent reports of growing advertiser spends position Facebook for a solid revenue/earnings beat. Hence, investors looking to benefit from a post-earnings rally in the Facebook stock price should buy into the stock ahead of the Q3 earnings release.