JPMorgan Tells Investors To Buy Facebook Pullback, Ads Shift Will Become 'Increasingly Valuable'

JPMorgan is not worried about the expected softness in ad sales of Facebook Inc FB next year and noted the continued strong performance in the third quarter. The firm advised investors to engage in buying the shares during the pullback period and reiterated its Overweight rating and a target price of $175 on the stock. This implied more than 40 percent upside potentials from the current levels.

Analyst Doug Anmuth’s comments came a day after the social media firm delivered better-than-expected numbers. The analyst thinks that the company has enough opportunities to improve monetization in the long term.

In a research note, the brokerage said, “Facebook’s massive reach and engagement continue to drive network effects, and its targeting abilities provide significant value to advertisers. We believe it is still very early in the development of Facebook’s ad platform, including an ongoing improvement in ad targetability and measurement as well as a shift toward ads with higher quality formats, which we believe will become increasingly valuable to advertisers.”

The analyst listed the following five key takeaways after the third-quarter earnings results:

• The social media firm is in a rarefied air.
• Company witnessed strong engagement with DAU/MAU in every region.
• Management’s comment on the outlook for the year 2017, which is termed as conservative by the brokerage.
• Expects revenue growth of 39 percent and sees 35 bps margin expansions.
• Estimates are more than achievable.

At last check, the stock fell 5.55 percent to $120.11.