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Facebook (FB) Outpaces Stock Market Gains: What You Should Know

Zacks Equity Research

In the latest trading session, Facebook (FB) closed at $199.36, marking a +0.33% move from the previous day. This move outpaced the S&P 500's daily gain of 0.15%. Meanwhile, the Dow gained 0.1%, and the Nasdaq, a tech-heavy index, added 0.05%.

Coming into today, shares of the social media company had gained 3.74% in the past month. In that same time, the Computer and Technology sector gained 1%, while the S&P 500 gained 1.32%.

Investors will be hoping for strength from FB as it approaches its next earnings release. The company is expected to report EPS of $2.50, up 5.04% from the prior-year quarter. Our most recent consensus estimate is calling for quarterly revenue of $20.82 billion, up 23.1% from the year-ago period.

FB's full-year Zacks Consensus Estimates are calling for earnings of $6.37 per share and revenue of $70.44 billion. These results would represent year-over-year changes of -15.85% and +26.15%, respectively.

It is also important to note the recent changes to analyst estimates for FB. These revisions typically reflect the latest short-term business trends, which can change frequently. With this in mind, we can consider positive estimate revisions a sign of optimism about the company's business outlook.

Our research shows that these estimate changes are directly correlated with near-term stock prices. To benefit from this, we have developed the Zacks Rank, a proprietary model which takes these estimate changes into account and provides an actionable rating system.

The Zacks Rank system, which ranges from #1 (Strong Buy) to #5 (Strong Sell), has an impressive outside-audited track record of outperformance, with #1 stocks generating an average annual return of +25% since 1988. Over the past month, the Zacks Consensus EPS estimate has moved 0.34% higher. FB is currently sporting a Zacks Rank of #3 (Hold).

Looking at its valuation, FB is holding a Forward P/E ratio of 31.18. For comparison, its industry has an average Forward P/E of 29.17, which means FB is trading at a premium to the group.

Investors should also note that FB has a PEG ratio of 1.51 right now. The PEG ratio is similar to the widely-used P/E ratio, but this metric also takes the company's expected earnings growth rate into account. The Internet - Services industry currently had an average PEG ratio of 2.63 as of yesterday's close.

The Internet - Services industry is part of the Computer and Technology sector. This group has a Zacks Industry Rank of 73, putting it in the top 29% of all 250+ industries.

The Zacks Industry Rank gauges the strength of our individual industry groups by measuring the average Zacks Rank of the individual stocks within the groups. Our research shows that the top 50% rated industries outperform the bottom half by a factor of 2 to 1.

Be sure to follow all of these stock-moving metrics, and many more, on Zacks.com.


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