Facebook's Growth Makes Shares Look 'Inexpensive' At These Levels

Despite Facebook Inc FB's 30 percent gain year-to-date and an outlook for a slowdown in ad load growth, analysts at MKM Partners believe the stock is still "inexpensive."

MKM Partners' Rob Sanderson maintained a Buy rating on Facebook with a price target boosted from $150 to $180 following the company's "very strong" earnings report last week.

Sanderson justified his price target based on the the stock's fundamentals. Specifically, a $180 price target is based on a 28.5x multiple on his 2018 earnings per share estimate of $5.95 (up from a previous $5.44). The analyst noted the 28.5x multiple on 2018 earnings is a similar multiple that the stock is trading on his 2017 earnings per share estimate of $4.83 (up from a previous $4.33).

Despite the analyst's bullish outlook, he did acknowledge investors will likely spend some time in debating the magnitude of revenue growth deceleration, expense growth, and the corresponding compression in margins.

Nevertheless, Facebook is the fastest-growing, large-scale advertising play for investors. In fact, compared to other large-cap media players, Facebook boasts a growth profile that is eight times as fast but carries only a 50 percent premium on an EBITDA bases.

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