Market Overview

KeyBanc Stays Bullish After Facebook's Q1 Print, Sees 'Opportunities To Drive Upside To Our Estimates'

Share:
KeyBanc Stays Bullish After Facebook's Q1 Print, Sees 'Opportunities To Drive Upside To Our Estimates'

Facebook, Inc. (NASDAQ: FB) reported a first-quarter EPS beat of $1.69 against a $1.35 estimate after the close Wednesday and a sales beat of $11.97 billion vs. an $11.41-billion estimate. Facebook reaffirmed its sales guidance while projecting that monthly and daily active users in Europe could be flat or lower in the second quarter due to new privacy laws on the continent. 

The Analyst

KeyBanc Capital Markets' Andy Hargreaves maintains an Overweight rating on Facebook's stock with an unchanged $245 price target.

The Thesis

Facebook said in its Q1 report that its advertising revenue grew 50 percent year-over-year, or 43 percent on a constant currency basis, Hargreaves said in a note. The social media company's revenue came in 4 percent ahead of Hargreaves' estimate. Ad impressions per daily active user accelerated in the quarter and grew 8 percent, with room to continue rising in the near term and partly driven by continued growth in Instagram engagement, the analyst said. 

Facebook lifted its 2018 capital expenditure guidance from around $14 billion to $15 billion, which represents a 123-percent increase from last year, Hargreaves said. The company is likely increasing spend on building its data center shells and capacity for new features, which should support growth for several years, he said.

If Facebook's capital intensity is structural in nature, then investors could start valuing Facebook's stock on a free cash flow basis rather than EBITDA or EPS metrics, which could limit upside potential, Hargreaves said. 

Nevertheless, Facebook's opportunity to deliver upside to the Street's estimates remains compelling through pricing growth, incremental growth in areas like video and messaging and lower-than-expected expenses, the analyst said. 

"We recommend buying the stock and see opportunities to drive upside to our estimates through pricing growth, incremental growth in video and messaging and lower-than-expected expenses." 

Price Action

Facebook shares were trading up 8.5 percent off the open Thursday. 

Related Links:

Stifel: What To Expect From Facebook, Amazon Q1 Prints

Alphabet Isn't Facebook, Stifel Says In Upgrade

Latest Ratings for FB

DateFirmActionFromTo
Oct 2020Truist SecuritiesMaintainsBuy
Oct 2020Wells FargoMaintainsOverweight
Oct 2020MizuhoMaintainsBuy

View More Analyst Ratings for FB
View the Latest Analyst Ratings

 

Related Articles (FB)

View Comments and Join the Discussion!

Posted-In: Andy Hargreaves DAUAnalyst Color Earnings News Price Target Reiteration Analyst Ratings Best of Benzinga

Latest Ratings

StockFirmActionPT
HYMCBMO CapitalInitiates Coverage On
DEMorgan StanleyMaintains335.0
SBNYRaymond JamesMaintains138.0
CORTHC Wainwright & Co.Maintains32.0
CYBBFCitigroupDowngrades
View the Latest Analytics Ratings
Don't Miss Any Updates!
News Directly in Your Inbox
Subscribe to:
Benzinga Premarket Activity
Get pre-market outlook, mid-day update and after-market roundup emails in your inbox.
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Fintech Focus
A daily collection of all things fintech, interesting developments and market updates.
Thank You

Thank you for subscribing! If you have any questions feel free to call us at 1-877-440-ZING or email us at vipaccounts@benzinga.com