Although social media stocks have been thrown into the proverbial “bubble” category, more and more people are using social media, and the companies are devising more and more ways to generate streams of revenue. In a research note from Cowen, the analysts see two top stocks coming in with big numbers, and aggressive investors may want to be in before earnings are released.
The Cowen team is very bullish on Facebook Inc. (NASDAQ: FB) and LinkedIn Corp. (NYSE: LNKD) before they report third-quarter numbers this week. Aggressive, risk-tolerant investors may want to buy or add to positions before the earnings are released.
This social media behemoth continues to plow ahead with unabated growth, with virtually no competition for the more than one billion and growing users the company has around the world. The analysts at Cowen forecast another very strong quarter with 56% top-line growth, 62% EBITDA growth and rising user count and engagement.
The analysts also point out that Facebook stock is up 10% since releasing second-quarter numbers, while the Nasdaq Internet index as a whole is down 5%. That shows incredible relative strength for a company that has already had a tremendous rise from the lows that were printed this time in 2012. The company releases earnings after the closing bell Tuesday.
With huge catalysts waiting in the wings for 2015, including rising mobile and video advertising, the new Atlas platform and Instagram monetization, Facebook could still have a long way to run. The Cowen price target for the stock is $90. The Thomson/First Call consensus target is set at $87.85. The stock closed trading on Monday at $80.28.
LinkedIn continues to dominate the interconnecting of business professionals, with more than 300 million members worldwide, making it the most valuable social networking site for business-to-business marketing today. The Cowen analysts remain positive on the stock long term, given the company’s large addressable markets, its well-established business model, a still new but promising opportunity in sales and marketing solutions, and the stock’s relative, although much improved, underperformance.
Cowen is above the Wall Street estimates for revenue and EBITDA. The analysts also believe the company is heading into a very favorable product release cycle, and they expect an update on the popular Sales Navigator addition on the earnings call. LinkedIn releases earnings on Thursday.
Cowen has a $253 price target for LinkedIn, and the consensus target is set at $240. Shares closed Monday at $199.99.
Even though these are two of the top social media stocks, it should be noted that on a valuation basis, despite both companies’ incredible growth, they are very expensive. Any sort of miss or poor forward guidance, and the stocks could get hammered. That said, aggressive investors may still want to buy in ahead of the reports.