Analyst Ken Sena, who rates shares "overweight," believes the new initiatives Facebook is taking with its ad targeting tools, new formats, and the timing of these changes will cause earnings to go up, and that the third-quarter should be stronger than the second-quarter. "We are modeling ad growth flat at 62%, despite an 800 bp tougher comparison (vs. Street 52%)," Sena wrote in his note.
He now expects third-quarter revenue to be at $1.94 billion, led by continued strength in mobile, which will account for $836 million in ad revenue. In the second-quarter, mobile accounted for $656 million in ad revenue.
For fiscal 2014, Sena raised his revenue estimate by 10% to $10.4 billion, approximately 10% above consensus estimates.Sena believes the company will update the ads it has on the right hand of its Web site, perhaps imminently. The redesign according to Sena, "should include larger formats, call-out buttons, and generate higher pricing for FB." The changes in the way Facebook approaches advertising may be just the beginning. Facebook's second-quarter earnings showcased the exceptional strength that mobile is having on its business, and those changes could be underestimated by Wall Street, as they only occurred during the middle of the quarter. "Timing is important in that many of the changes only began towards the middle-to-end of the quarter and have yet to have a full quarter's impact, which bodes well for forward estimates," Sena wrote. -- Written by Chris Ciaccia in New York >Contact by Email. Follow @Chris_Ciaccia