Analyst Michael Pachter assumed coverage of Facebook, with an Outperform rating and price target of $115, which implies an upside of 25% from current levels. Despite its phenomenal growth over the past 10 years, the analyst expects Facebook to continue to grow its active user base over the next 10 years.
Pachter wrote, “The company has taken its Instagram user base from an estimated 30 million MAU in mid-2012 to over 400 million MAU today. Similarly, its WhatsApp user base has grown from 400 million MAU in late 2014 to over 800 million today. Facebook’s Messenger service has grown to over 700 million MAU in less than a year. We expect the company to grow the engagement and monetization of users on these three platforms rapidly over the next several years, while continuing to grow its ARPU globally as it delivers an increasingly media-rich suite of advertisements.”
The analyst concluded, “We expect the company to reinvest a considerable portion of its EBITDA growth in new initiatives, including building advertising platforms for Instagram, Messenger, and WhatsApp, while at the same time investing in growing its Oculus VR offering. Notwithstanding the impact of reinvestment on free cash flow, we think that Facebook is positioned to continue to grow revenues and contribution profit at a very high rate for the foreseeable future, and we think that the stock has the potential to appreciate for several more years.”
According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Michael Pachter has a total average return of -3.4% and a 41.7% success rate. Pachter has a 59.3% average return when recommending FB, and is ranked #3441 out of 3755 analysts.
Out of the 46 analysts polled by TipRanks, 41 rate Facebook stock a Buy, 4 rate the stock a Hold and 1 recommends a Sell. With a return potential of 20%, the stock’s consensus target price stands at $109.75.
The analyst assumed coverage of Twitter, with a Neutral rating and price target of $30, which implies an upside of 14% from current levels. Pachter thinks that ultimately, Twitter can rival Facebook in reach, but in order to accomplish this, the company requires a change of strategy.
Pachter stated, “In our view, Twitter users can be divided into two broad classes: voyeurs and exhibitionists. The company must convince non-users that it is acceptable to use Twitter to capture real-time information on any topic of interest, and must convince its users to post real-time information as events unfold. In order to accomplish this, we believe that Twitter must adopt a model that provides an incentive to its exhibitionist users that rewards them for capturing an audience.”
“Until we see evidence that Twitter management has adopted a strategy that will drive user and engagement growth, we advise investors to remain on the sidelines,” the analyst added.
Out of the 43 analysts polled by TipRanks, 17 rate Twitter stock a Buy, 25 rate the stock a Hold and 1 recommends a Sell. With a return potential of 60%, the stock’s consensus target price stands at $42.07.
Don’t be late to the party – Click Here to see what 4500 Wall Street Analysts say about your stocks.