Deutsche Bank Says Dynamic Ads May Be Facebook's 'Catalyst'

In a report published Monday, Deutsche Bank analyst Ross Sandler stated that his checks pointed towards a "solid" first quarter result for

driven by continued growth in video and core newsfeed monetization, coupled with "modest" progress at Instagram. "Our proprietary checks have been consistently solid all quarter around video, new Instagram ad formats, and the more recently positive tests on Dynamic Product ads," Sandler wrote. "Shares recently broke out of the mid-$70's range with the announcement of Messenger P2P payments and platform strategy, and we think 1Q could serve as another small catalyst." Sandler is projecting Facebook will report a GAAP earnings per share of $0.16 on revenue of $3.504 billion. This compares to the

Consensus earnings per share estimate of $0.44 and revenue of $3.627 billion and the Wall Street Consensus earnings per share estimate of $0.40 and revenue estimate of $3.566 billion. Sandler is projecting ad revenue of $3.26 billion (representing a 51 percent year-over-year gain, ex-foreign exchange), a figure that is slightly below consensus estimates but still "do-able." Sandler said that Facebook remains the most "consensus long" name of any large cap Internet stock. The analyst did note that the set-up heading into the first quarter does feel "neutral" with buyside expectations expecting a slight upside to ad revenue, but nothing too stretched. At the same time, operating expenditure growth concerns are still "elevated" and the print serve be a "stress-test" on the 50 percent- 65 percent operating expenditure guidance as "the real run rate" versus "could be conservative." Shares remain Buy rated with an unchanged $90 price target.