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Facebook's Fundamentals Remain The Strongest Across The Internet Sector

November 3, 2016 1:56 pm
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Shares of Facebook Inc (NASDAQ: FB) were trading lower by 5.6 percent after the company's earnings report resulted in at least one of Wall Street's top analysts to declare the stock no longer an attractive buy.

Mark Mahaney of RBC Capital Management isn't ready to throw in the towel. The analyst reiterated an Outperform rating on Facebook's stock with an unchanged $170 price target.

Mahaney noted that Facebook's stock initially dipped 7 percent after the company's management said its Ad Revenue growth will drop "meaningfully" in 2017 as Ad Load becomes a smaller driver of growth. 2017 is also expected to be an "aggressive" investment year.

Mahaney's take is simple: Facebook's cautious sounding commentary is "very consistent" with the company's prior commentary and the Street is already modeling 20 points of Ad Revenue deceleration in 2017, which is "actually overly meaningful."

The analyst added that Facebook has several large revenue growth drivers in its pipeline such as Instagram monetization, Video Ad innovations, Messaging Platform monetization.

Finally, Mahaney stated that Facebook's market share of the total global online advertising space is 15 percent and just 5 percent of the total global advertising market which implies the company has plenty of room to grow.

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