Facebook Is A Top Pick At JPMorgan Into Q1 Results

Facebook Inc FB is scheduled to report its 1Q16 earnings on April 27. JPMorgan’s Doug Anmuth maintained an Overweight rating for the company, with a price target of $136.

Analyst Doug Anmuth named the stock as a top pick, citing the company’s “consistent, strong FXN ad revenue growth driven by mobile newsfeed, mobile time spent share in the U.S. of ~20%, upside from retargeting ad performance, and room for ad load increases across core FB and Instagram.”

1Q Expectations

Anmuth expects Facebook to post ad revenue of $5.08B, with 59 percent FXN y/y growth, marking a deceleration from the 66 percent FXN y/y growth reported in 4Q15, despite easier comps. The company’s total revenue is estimated at $5.3B, representing 50 percent y/y growth and 9 percent sequential growth. The estimate is slightly above the Street consensus of $5.2B.

“Our PMD checks during the quarter remain bullish on DPAs and we believe these ads are among the most effective and highest priced on FB,” the analyst wrote.

Facebook is expected to record MAUs of 1.64B, representing 14 percent y/y growth, flat with the growth achieved in 4Q. Mobile MAUs are estimated at 1.51B, representing 21 percent y/y growth.

The PF EPS estimate for the quarter is at $0.65, representing 54 percent y/y growth, and ahead of the Street expectation of $0.62.

Looking Ahead

Instagram revenue is expected to come in at $250M in 1Q, which means it is on track to achieve $1.27B in 2016, with increases in engagement, ad load, and ad demand. Anmuth noted further that Facebook seems to be poised to grow cash opex by 46 percent in 2016, toward the low-end of the company's guidance of 45-55 percent.