Facebook Just Had Its Biggest Upside Quarter In Three Years

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  • Facebook Inc FB shares appreciated more than 14 percent in morning trade on January 28.
  • Deutsche Bank’s Ross Sandler has maintained a Buy rating on the company, while raising the price target from $125 to $145.
  • Sandler noted that the company has “delivered the greatest” quarter in 4Q since mid-2013, while mentioning that the primary driver for the stock is likely to come from upward revision of forecasts.

According to the Deutsche Bank report, “Ad revenue growth accelerated 9ppts against a 6ppt easier comp, with 80 percent of ad revenue coming from mobile. Initiatives like Instagram, DPA and video are starting to take off while areas like Messenger, WhatsApp & VR are being cultivated and should provide future legs to growth.”

Analyst Ross Sandler mentioned that new disclosure regarding video indicate that Facebook continues to narrow the gap with YouTube in short form mobile video.

For 4Q15, the company reported strong results, with “upside across the board.” Sandler noted that robust spending on ad categories and across geographies was responsible for the ad revenue upside, while margins and adjusted EBITDA beat expectations and grew for the first time in 12 months.

Facebook issued in-line opex guidance for 2016 at 45-55 percent year on year, although the tax rate guidance was lower than anticipated.

“Instagram was likely in the $250m range for the quarter (DBe), with 98 of its top 100 spent on the platform in 4Q, implying core FB ad growth near-60 percent ex-fx,” Sandler added.

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Posted In: Analyst ColorLong IdeasPrice TargetAnalyst RatingsTrading IdeasDeutsche BankRoss Sandler
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