Susquehanna Upgrades Facebook and Raises PT, Expects Positive Revisions

Susquehanna Financial Group analyst Brian Nowak upgraded

from Neutral to Positive and raised the price target from $52 to $68. Nowak noted that "as load capping" and "teen" comments are overblown and Susquehanna sees the slowing ad load growth as a positive for the social network site. Susquehanna added that Instagram is growing 58% year-over-year and is still a "greenfield" opportunity. The analyst expects Facebook to deliver positive revisions. Susquehanna commented, "FB's decision to not 'significantly' increase the number of sponsored stories as a percentage of newsfeed is a positive long-term move as restricting supply growth in an auction pricing model, combined with improving ad quality and conversion (which FB is focused on), is likely to lead to even faster ad dollar growth. We have seen this playbook before from GOOG, and with FB sponsored story CPMs still low (60%-70% discount to other display players), we see pricing heading higher." Video ad revenue is not included in the analyst's model given the timing uncertainty. Nowak estimated that Facebook Video would generate $1.1 billion in annual revenue, even assuming that the ads are sold at $8 CPM versus other online video at $20+. The analyst raised 2014 and 2015 revenue estimates by 6%. Facebook closed at $53.81 on Monday. Shares are currently trading +2.06% at $54.92.