Mark Mahaney: Facebook 'May Retrace Shortly Here,' But Negligible Chance Of Stock Slumping

Mark Mahaney, RBC Capital Markets Internet analyst, was on CNBC to explain why one shouldn't be worried about Facebook Inc FB's rising expenses and why there is little chance of the company's shares going lower from here.

Expenses Not A Concern

"Well, I guess so far they have done a pretty good job of doing that (investing)," Mahaney began. "And by the way, this is still early stage for Facebook, the bigger mistake would be under-investing not over-investing. And unlike Google, they seem to be a little bit more careful about guiding to expenses and then meeting or beating those expense goals. So far we get they deserve the credibility they have gotten on the cost side."

May Retrace Shortly Here

Mahaney was asked if he sees Facebook's stock going significantly lower from here. He replied, "I don't think so, but it does depend on whether these greenfield revenue opportunities that we've been focused on whether they really come through or not. So, that's Instagram monetization, video ads, those WhatsApp communications platforms where they can really monetize those and maybe this Oculus Rift virtual reality platform."

"Our point of view is that these are enough billion dollar-like incremental revenue streams that you should see a pretty solid deceleration, but pretty consistent deceleration and modest deceleration in the growth rate."

"If that's what happens, you're going to have close to $4 in earnings in 2017 and stock's going to go higher. We may retrace shortly here, but overall fundamentals are about as strong as you can find in this sector and valuation is still reasonable," Mahaney concluded.