JMP Reiterates $165 Price Target On Facebook Shares

Facebook Inc FB shares are trading down on concerns of slowdown in ad sales despite delivering better than expected results for the third quarter.

JMP is ready to take advantage of any weakness about concerns for the next year. The firm reiterated its Market Perform rating and price target of $165 implying more than 30 percent upside potentials from the current levels.

Analysts Ronald Josey and Andrew Boone viewed Facebook shares as a top pick citing a number of catalysts that included new ad products, Instagram and video as far as the near-term are concerned. For the long-term, they pointed out Oculus, WhatsApp, and Messenger to provide necessary catalysts.

The brokerage was impressed by the following:

• Sequential stabilization of overall DAU/MAU ratio at 65.9 percent.
• Live video usage grew 4x since May with Olympics generating 1.5 billion interactions among 270 million users.
• The elections generated 5.3 billion posts or likes from 109 million users in the first nine-month period.
• Ad revenue growth of 59 percent on year-over-year basis excluding currency impact.
• Narrowing of Profitability and PF Operating Expense forecast.

In a note, JMP said, “Given management commentary that 2017 is expected to be another investment year as technology hiring is ramping, while also reiterating that ad load growth is expected to slow in 2H17 impacting ad revenue growth, Facebook shares declined ~7% in after-hours trading to $118.21. We already took into account the expected change in ad load growth in our projections, and based on our view that Facebook’s multiple opportunities across its 10+ year strategic plan likely require significant investment, we believe increasing investments is the right thing to do.”