Why Analysts Are Pushing Facebook Even Higher

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Facebook Inc. (NASDAQ: FB) released its most recent earnings report late Wednesday and watched its shares hit a new all-time high before pulling back slightly to close out the week. As a result, analysts chased Facebook even higher.

The stock started out the week at $131.58 and actually rose as high as $135.49 after earnings. However, shares would subside and close out the week for a loss at $130.98.

24/7 Wall St. has included some highlights from the earnings report, as well as what a few key analysts said after the fact.

The company posted $1.41 in earnings per share (EPS) and $8.81 billion in revenue, compared with consensus estimates from Thomson Reuters of $1.31 in EPS and revenue of $8.51 billion. The same period of last year reportedly had EPS of $0.79 and $5.84 billion in revenue.

Mobile advertising revenue represented roughly 84% of all advertising revenue ($8.63 billion) for the fourth quarter, up from 80% of advertising revenue last year.

Facebook said that for the December quarter it had an average of 1.23 billion daily active users (DAUs), an increase of 18% from last year. Mobile DAUs were 1.15 billion on average in this same time, an increase of 23%.

Monthly active users (MAUs) totaled 1.86 billion for this quarter, up 17% year over year. During the same period, Mobile MAUs totaled 1.74 billion, an increase of 21%.

Merrill Lynch was one of the first analysts to chime in on Facebook. The firm reiterated a Buy rating and raised its price objective to $165 from $150. The firm further detailed its investment rationale as follows:

Facebook is an investment in increasing social and mobile Internet usage, and also offers exposure to growing Internet usage in emerging markets. Driven by user growth, new product offerings, and new ad formats, we expect Facebook to gain share in advertising markets and grow close to 30% over the next three years, which warrants a premium P/E valuation and in-line P/E/G valuation versus its Internet peers.

Credit Suisse reiterated an Outperform rating and raised its price target to $170 from $165. The firm expects investor focus to lie with the higher-than-expected OpEx growth guidance of GAAP 40% to 50% and non-GAAP 47% to 57%, respectively, with the likely delta due to planned incremental investments in video (revenue share in COGS) as well as Oculus (development costs in research and development).

Credit Suisse said in its report:

CapEx guidance was also higher than expectations at $7.0-$7.5b. We do note that for both video and eventually Oculus, this does come attached to generated revenue so we continue to believe there is upward bias to estimates and remain buyers of FB shares as we do not view our investment thesis as being impaired in any way: 1) Facebook will be able to drive long term revenue growth without a material lift in ad loads – nearterm drivers include Instagram, Premium Video, and DPA, 2) Street models continue to underestimate the long-term monetization potential of upcoming new products (Graph Search), 3) optionality and upward bias to estimates, which do not contemplate contributions from multiple other products including Messenger and WhatsApp.

Wedbush reiterated an Outperform rating and raised its price target to $175 from $162. The firm believes that Facebook has a huge competitive advantage with nearly 1.9 billion MAUs and over 1.2 billion DAUs, attracting 4 million advertisers to its captive and desirable audience. Wedbush expects rapid growth overseas and expanded monetization of under-penetrated Instagram, WhatsApp and Messenger over the coming years. Facebook’s initiatives position it for long-term growth, which it anticipates to continue for the next decade. In summary, the firm believes Facebook is a great company, period.

Some other analysts weighed in on Facebook as well:

  • Citigroup raised its price target to $165 from $158.
  • Canaccord Genuity has a Buy rating and raised the price target to $155 from $150.
  • Deutsche Bank also has a Buy rating and raised its target to $155 from $150.
  • Instinet raised its price target to $165 from $155.
  • Jefferies reiterated a Buy rating with a $175 price target.
  • JPMorgan has an Overweight rating and raised its price target from $165 to $170.
  • Mizuho has a Buy rating and raised the price target to $148 from $146.
  • Morgan Stanley has an Overweight rating and raised its price target to $165.
  • Pacific Crest has an Overweight rating and raised its price target to $155 from $150.
  • Pivotal Research downgraded Facebook to Hold from Buy and cut its target to $135 from $147.
  • RBC Capital Markets raised its price target to $175 from $170.
  • Susquehanna has a Positive rating and raised the price target from $160 to $180.
  • UBS has a Buy rating and raised its price target to $155 from $154.
  • Oppenheimer reiterated an Outperform rating and raised its price target to $155 from $144.

Shares of Facebook closed Friday at $130.88, with a consensus analyst price target of $159.37 and a 52-week trading range of $96.82 to $135.49.