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We're Still In The Early Stages Of Facebook's Monetization Potential

We're Still In The Early Stages Of Facebook's Monetization Potential
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Facebook Inc (NASDAQ: FB) delivered solid 1Q16 results. Morgan Stanley’s Brian Nowak maintained an Overweight rating for the company, with a $140 price target, saying that Facebook’s reach, engagement and ad offerings continued to improve, since “it's arguably still early days.”

Delivering A Solid Quarter

The ad business generated 63 percent y/y growth, driven by strength in North America. The company reported 1.65bn monthly users, beating expectations. Engagement was also better than expected, with users now spending 50 minutes per day on the platform, analyst Brian Nowak said.

Related Link: Facebook Beats On Earnings, Revenue And MAUs; Issues New Stock Class/Dividend

Facebook’s 1Q16 results highlighted the platform's advertising strength. Nowak commented that the results also indicated that it was still early in Facebook’s monetization potential, with users and user engagement continuing to grow and the company continuing to improve its ad tools and offerings.

“We believe India, Brazil (driven by Facebook Lite) and the US were particularly strong, but MAU growth was broad-based, beating our estimate in all 4 regions,” the analyst wrote. He added that the rise in time spent per user was “particularly impressive,” since total daily users had grown by 13 percent or 122mn over the first quarter.

Looking Ahead

Growth in the daily user base and time spent per user is expected to continue to boost Facebook’s monetization opportunity, with increased engagement resulting in an improvement in user data and targeting, “while also enabling the company to delivery more ad impressions and monetization opportunities,” Nowak commented.

The non-GAAP EPS estimate for 2016 has been raised by 5 percent to ~$3.75 to reflect a lower tax rate.

Latest Ratings for FB

Apr 2017Credit SuisseMaintainsOutperform
Mar 2017BarclaysInitiates Coverage OnOverweight
Mar 2017BTIG ResearchUpgradesNeutralBuy

View More Analyst Ratings for FB
View the Latest Analyst Ratings

Posted-In: Brian Nowak Morgan StanleyAnalyst Color Long Ideas Reiteration Analyst Ratings Tech Trading Ideas Best of Benzinga


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