SunTrust Raises Facebook PT and Estimates on Increased Optimism

In a report published Monday, SunTrust Robinson Humphrey analyst Robert Peck raised estimates and the price target from $55.00 to $65.00 for

based on increased optimism. Peck noted improvement in ad quality and pricing, in addition to stable trends in user growth and engagement. The analyst pointed out five factors including “1) Ad load concerns seem to be overdone and are being offset by better targeting & pricing; 2) Teen usage concerns are over blown, as Facebook has crossed the chasm from "cool app" to a utility; 3) Social apps, and Facebook particularly, seemed to have a strong 4Q based on 3rd party reports; 4) the monetization of Instagram has begun, helping counter a tough comp; 5) Mobile video ads have begun, also helping a tough comp. We think Instagram and video ads can add ~$300m in new revenues in 2014.” SunTrust reported that the FBX program for Facebook continued to be a growing percentage of the ad units which could aid in further long-term upside. Peck commented on the greater functionality of the Facebook platform in providing more ways to reach users off-Facebook and doubling the number of partner categories to more than 1,000. The analyst noted that these improvements will increase value and ROI to advertisers, pushing more ad dollars. Robert Peck increased revenue estimates from $2.29 billion to $2.37 billion, versus street estimate of $2.34 billion. The analyst raised Facebook's EBITDA estimate from $1.5 billion to $1.53 billion, versus street estimate of $1.41 billion. 2014 and EBITDA estimates were reported at $10.68 billion and $6.55 billion, respectively. SunTrust reiterated a Buy rating on Facebook. Shares of Facebook closed at $54.71 on Friday.