Calm Down Everyone, Facebook's Growth Was Bound To Slow Down Eventually

3Q Review

Analyst Youssef Squali attributed the outperformance to the following factors:

• Healthy MAU growth and steady engagement.
• Robust advertiser demand, particularly for video.
• Further shift to mobile.

The analysts highlighted the revenue and EBITDA outperformance, with ad revenue being the driver and strength across all geographies and normalized earnings per share estimate-beat. Monthly average users rose 15.7 percent year-over-year, the strongest since the fourth quarter of 2013, the analyst noted. Though decelerating slightly, the analyst noted that mobile ad revenue rose a decent 71 percent, in line with estimates. Desktop growth also exceeded estimates, aided by reduction in ad blocking.

The analyst believes the company's fourth-quarter guidance for a slowdown in fourth-quarter growth and 2017 and higher investments is consistent with the previous year's commentary and would prove conservative.

Facebook Is Top Pick

The firm sees advertiser demand, user growth & engagement and expected increase in ad load for Instagram as positives. Premised on the following factors, the firm termed Facebook as its top pick:

• Its position as the largest/most engaging Internet platform, offering personalized marketing at scale.
• Massive video-viewing shift from TV to online.
• Migration of ad dollars to mobile/social.
• Untapped monetization potential for WhatsApp, Messenger and Oculus.

Sweet Spot Of Mobile Opportunity

Cantor Fitzgerald believes Facebook will continue to gain share from print and TV budgets. The company remains in the sweet spot of the mobile opportunity, as the gap between media time spent on mobile and ad budgets allocated to mobile narrows over time.

As such, Cantor Fitzgerald maintains its Buy rating on Facebook and raised its price target to $170 from $160, citing the third quarter outperformance.

At last check, Facebook was down 4.48 percent at $121.47.