Facebook's Competitive Advantage In Full Display

Facebook Inc FB has a "huge competitive advantage with nearly 1.9 billion monthly active users and over 1.2 billion daily active users, attracting 4 million advertisers to its captive and desirable audience,” Wedbush’s Michael Pachter said in a note.

The analyst maintained an Outperform rating on the company, while raising the price target from $162 to $175.

“A Great Company”

Pachter expects Facebook to deliver rapid overseas growth, along with expanded monetization of its under-penetrated segments, such as Instagram, WhatsApp and Messenger, over the coming years.

“Facebook's initiatives position it for long term growth, which we anticipate to continue for the next decade,” Pachter mentioned.

Q4 Results

The company reported revenue of $8,809 million for Q4 2016, ahead of the consensus and the estimate, driven by mobile advertising and user growth, along with strength across all geographies.

EPS came in at $1.41, again beating expectations, driven by leverage from lower operating expenses as well as higher revenue growth.

Mobile advertising revenue accounted for 84 percent of the total advertising revenue, which came in at $8,629 million, representing almost $3 billion in year-on-year mobile ad growth.

2017 Outlook

For 2017, the analyst expects ad load growth rates to slow “in order to preserve the user experience, but we expect user growth and advertiser demand around new ad products to more than offset the impact to revenues in 2017.”

On the other hand, revenue growth is expected to beat expectations, while expenses are likely to fall short, despite Facebook’s aggressive hiring “spree,"

“We are increasing our FY:17 estimate for revenue to $40,750 million from $37,694 million, and for EPS to $6.25 from $5.70, reflecting 49 percent year-over-year growth in advertising revenue, and 47 percent expense growth,” Pachter added.