Fed Rate Hike Shouldn't Matter; Facebook Earnings Preview
The S&P 500 ETF (SPY) - Get Report is down 0.5% on Wednesday as Federal Reserve Chair Janet Yellen left open the possibility of an interest rate hike in December.
On CNBC's "Fast Money Halftime" show, Josh Brown, CEO and co-founder of Ritholtz Wealth Management, said he doesn't believe the economic data will be strong enough this year to justify a rate hike. That's not to say the data will be bad, just not robust enough to tighten monetary policy.
Jon Najarian, co-founder of optionmonster.com and trademonster.com, reiterated a similar belief, saying that Yellen is probably just trying to keep the possibility of a rate hike on the table, so that investors don't completely write it off this year.
Asset prices -- like utility stocks and bond yields -- aren't signaling that the market is about to embark on a rising rate environment, added Joseph Terranova, senior managing director at Virtus Investment Partners. The Fed seems more likely to have a "one and done" rate hike instead, so the timing of it doesn't really matter that much.
The conversation turned to Facebook (FB) - Get Report , which reports earnings after the close on Wednesday. "At a $300 billion valuation, this report and the outlook better be absolutely flawless," Brown said, otherwise the stock will likely drop back below $100. A few hours before the close bell, Facebook shares were trading at $103.43, up by less than 1%.
Neil Doshi, senior equity analyst at Mizuho Securities, has a buy rating and $107 price target on Facebook. One of investors' main focuses will be on Instagram and how the company's monetization of that platform is coming. They will also be focused on video ad revenues, Doshi said. The company is expected to grow revenues 40% - which is very impressive - but the focus will be on guidance.
Doshi says that revenue growth guidance in the low- to mid-30% range will be key. If management guides in the upper end of that range or above it, and the stock should move higher. Below that range and the stock will likely drop below $100, Doshi explained.
Pete Najarian, co-founder of optionmonster.com and trademonster.com, said the stock has the potential to move "much, much higher" over the long-term. While mobile is a key pillar to Facebook's growth today, the company still has room for growth tomorrow. Where? Najarian pointed to India as a region that has long-term potential.
Terranova added that Twitter's (TWTR) - Get Report strong ad revenue results this quarter should bode well for Facebook when it reports its earnings. Investors should keep an eye on the company's expense guidance, something that weighed on the stock last year.
In the short-term, the focus will be guidance and performance, Terranova said. But in the long-term Facebook still has a lot of momentum in its growth. Where else are portfolio managers going to get that kind of growth?, he asked.
Brown answered by saying Netflix (NFLX) - Get Report still gives investors growth. The company is moving higher, up 3% on a day when other media stocks are getting hit over Time Warner's (TWX) weak guidance. The company is focused on long-term growth, much like Amazon (AMZN) - Get Report , he added.
Terranova also likes Amazon, which has rising revenues and expanding margins. The stock should continue to perform well going into 2016.
Jon Najarian likes Facebook too, along with Disney (DIS) - Get Report . The stock has several upcoming and current catalysts, such as football season (on ABC and ESPN) and the upcoming Star Wars film.
Pete Najarian added that he likes Apple (AAPL) - Get Report . The stock has climbed above its major moving averages and looks like it could make a move to $130. The company's long-term potential remains attractive.
This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.