Needham Maintains Facebook at Buy, $40 PT

Needham has published a research report on Facebook FB reiterating its Buy rating and $40 price target. In the report, Needham writes, "The promise of FB (and all social media) is to communicate directly with customers. Participating in the conversation allows brands to have more meaningful relationships with customers. Since we initiated coverage of FB on May 23, several things have occurred that suggest that FB has overcorrected to the downside. FB's valuation has been under pressure because of skepticism that advertising may not “work” on FB, and that therefore FB's revenue growth may be disappointing. However, over the past 3 weeks, Oracle and Salesforce.com (CRM-BUY) have spent over $1B combined to purchase social marketing companies at higher valuations than FB. These commitments of new money to the social space, of which FB is the anchor tenant, imply that well-regarded public companies are valuing FB more robustly than investors are valuing FB." Facebook closed at $27.10 on Friday.