SunTrust said Facebook Inc FB will report strong Q1 earnings, based on "positive industry data and checks." The analysts noted that advertising revenues may fall quarter-over-quarter; however, revenues will simultaneously show "strong mobile pricing and volumes." The analysts have a $90 price target on the stock, with a Buy rating.
The stock closed Tuesday at $83.51.
SunTrust said that Q4 2014 and Q1 2015 saw "several important developments" that investors should pay attention to. Notably, Messenger gained more than 600 million monthly active users, while Facebook added mobile payments and third-party app integration into the platform. Secondly, SunTrust said Instagram's looping videos and monetization efforts increased slowly. Finally, investors should watch Facebook's acquisition of search engine TheFind, while looking at the company's overall ecommerce efforts.
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However, SunTrust argued that Facebook may continue to spend at "elevated levels," creating a risk for earnings. Also, SunTrust is looking at a potential trend where teens switch from using Facebook to other properties, like Instagram, that the company does not monetize as well.
For earnings on April 22, SunTrust said it expects revenues at $3.49 billion with EPS of $0.42 per share. On mobile, SunTrust said that revenues will be at $2.33 billion.
The $90 price target reflects a 35x price/earnings multiple, which SunTrust set against growth rates of 40 percent.
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