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Wall Street's Reaction To Facebook's Q1: The Good, The Bad And The Ugly

May 6, 2017 9:05 am
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Shares of Facebook Inc (NASDAQ:FB) traded as low as $148.72 Thursday morning after the company reported its first-quarter report Wednesday afternoon.

Here is a round-up of what some of Wall Street's most notable Facebook analysts are saying.

Baird: Strong Report With Some Overhangs

Baird's Colin Sebastian maintains an Outperform rating on Facebook's stock with an unchanged $163 price target.

According to Sebastian, Facebook impressed investors yet again with a top- and bottom-line beat and benefited from "broad-based" advertiser demand along accelerations in Europe and rest of the world.

Sebastian also noted Facebook's monthly active users rose 17 percent from a year ago to 1.94 billion and is nearing the coveted 2-billion mark. This indicates Facebook's growth remains healthy and could put to rest any concerns over user engagement.

However, the analyst did highlight a "yellow flag" in which management said that video content will prove to be a margin drag beyond 2017 — a fact which Sebastian believes is "justified" given expectations for very large market share gains in the online ad space.

Looking forward to the rest of 2017, Sebastian is modeling Facebook's full-year revenue to rise 38 percent from a year ago to $38.1 billion and then rise another 29 percent in 2018 to $49.1 billion.

Loop Capital: Notable Developments Beyond The Numbers

Loop Capital's Blake Harper maintains a Buy rating on Facebook's stock with an unchanged $175 price target.

Harper highlighted Facebook will open its platform to developers to leverage its video, artificial intelligence and virtual reality capabilities to its large audience. The analyst also believes Facebook's new camera features will improve audience and engagement growth and also make it more difficult for rival to Snap Inc (NYSE:SNAP) to compete in the social media space given its smaller audience size and scale.

Harper also noted that Facebook's game-plan is three-fold: 1) allow business the ability to fully leverage the power of mobile, 2) develop innovative ad products and 3) make these ads more relevant and effective.

The company's game plan should help alleviate some of the ongoing concerns marketers have over Facebook's measuring capabilities and also supports a bullish outlook on the stock.

Oppenheimer: The Good 'Keeps On Getting Better'

Oppenheimer's Jason Helfstein maintains an Outperform rating on Facebook's stock with a price target boosted from $155 to $170.

According to Helfstein, the positive aspects contained in Facebook's earnings report "keeps on getting better." The analyst highlighted Facebook's 49 percent revenue expansion in the quarter which was 4 percent faster than expected along with a 74 percent year-over-year improvement in earnings per share.

Helfstein also noted that Instagram continues to grow "rapidly" as evidenced by the 200 million daily active Stories users.

Looking forward the company faces "material greenfield opportunities" to capture, including an open camera platform, Messenger, e-commerce integration within the social media platforms and virtual reality.

Finally, Helfstein stated his $170 price target implies a "reasonable" multiple of 14x 2018E EBITDA and 26x FCF/share, especially for a company that is growing its top line at 34 percent.

Credit Suisse: Facebook Remains The Preferred Destination For Marketers

Credit Suisse's Stephen Ju maintains an Outperform rating on Facebook's stock with an unchanged $175 price target.

Ju noted Facebook's earnings report reinforces his prior investment thesis, which is based on:

    1. The ability to drive long-term revenue growth without a material lift in ad loads.
    2. The Street is underestimating the company's long-term monetization potentials.
    3. Facebook's upside from Messenger, WhatsApp and other platforms are not factored into current estimates.

Since Facebook's status remains the preferred platform for marketers, the bullish thesis surrounding the stock remains unchanged.

Wells Fargo: Facebook's 'Always On' Plan Is Notable

Wells Fargo's Peter Stabler maintains an Outperform rating on Facebook's stock with a valuation range raised from $155–$160 to a new range of $165–$175.

Part of Stabler's bullish stance is attributed to Facebook's ability to offer marketers a massive audience, deep targeting capabilities, and an expanding range of new products. The analyst added Facebook's status as an "always on" platform is attractive for "virtually every significant marketer globally."

On the other hand, Stabler did note investors will continue questioning the company's depth of investment within video, especially in terms of working with content providers to develop content. The analyst's take is that long length professionally produced content should generate a "high value video advertising inventory."

Elsewhere On The Street

Related Links:

Facebook's Decision To Hire Thousands Of Employees Doesn't Concern Analysts At BMO

Facebook's Valuation Doesn't Reflect Its Industry-Leading Status

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