Facebook Inc (NASDAQ:FB) reported a solid quarter on Wednesday, with sales growth that beat analysts’ estimates. Specifically, revenue in the third quarter, ending September 30, rose 48% to $10.33 billion, from $7 billion in the same period a year earlier, topping the $9.85 billion expected on average among analysts. The gains represent Facebook’s 10 straight quarterly revenue beat, buoyed by mobile video ads sales, including those on Instagram. The company posted a profit of $4.7 billion, up 44% from a year-earlier profit of $2.63 billion, with earnings per share of $1.59, up 77% from 90 cents in the same period a year earlier and beating analysts’ estimates of $1.28 per share.
Baird’s top analyst Colin Sebastian commented, “At first glance, no change to our positive thesis after Facebook reported stable ad revenue growth despite previous commentary around diminishing ad load contributions in 2H17. In the earnings release, the company indicated it is investing heavily to better prevent abuse on its platforms, so much so that “…it will impact our profitability. Protecting our community is more important than maximizing our profits.” Given the recent share appreciation on the heels of positive large-cap tech 3Q results, we expect shares will trade within a narrow range off these results as investors await clarity on headcount/investment trends.”
Sebastian rates Facebook shares an Outperform with a price target of $185, which implies a slight upside from current levels. (To watch Sebastian’s track record, click here)
Facebook CEO Mark Zuckerber said, “Our community continues to grow and our business is doing well, But none of that matters if our services are used in ways that don’t bring people closer together. We’re serious about preventing abuse on our platforms. We’re investing so much in security that it will impact our profitability. Protecting our community is more important than maximizing our profits.”
In light of the the earnings announcement, Facebook shares are rising nearly 1% in after-hours trading Wednesday.
When it comes to Wall Street’s bet, the odds are on this social media giant, with TipRanks analytics showcasing FB as a Strong Buy. Out of 29 analysts polled in the last 3 months, 27 are bullish on Facebook stock while one remains sidelined, and one is bearish. With a return potential of nearly 10%, the stock’s consensus target price stands at $201.35.