Where is Facebook Inc (NASDAQ:FB) growth headed after trouncing revenue and profit expectations last Wednesday with its third quarter print for the year?
Wedbush analyst Michael Pachter puts his hands together for the king of the social media court, believing this titan’s opportunity has no limits, “to infinity and beyond.”
In reaction to the strength of the company’s earnings, guidance that gleams “exceedingly conservative,” and safety, video, as well as hardware investments carving “ample room for growth” come next year, the analyst reiterates an Outperform rating on FB stock while bumping up the price target from $225 to $230, which implies a close to 28% upside from current levels. (To watch Pachter’s track record, click here)
For the third quarter, FB posted $10,328 million in revenue, outclassing the analyst’s forecast looking for $10,178 million as well as “handily” beating consensus of $9,836 million. “Revenue upside was driven by momentum from ad products which continue to simultaneously drive meaningful ROI for advertisers and engagement among its vast and global audience,” the analyst writes. Ad revenue in the quarter experienced a 43% surge “or more in geography,” Pachter adds, with overall ad revenue growing to the tune of 49%. GAAP EPS of $1.59 brought in another beat for the titan, outperforming both the analyst’s projection of $1.44 and consensus of $1.28. Mobile advertising revenue sliced roughly 88% of the $10,142 million out of the total advertising revenue pie, a step up from last quarter’s approximate 87%, which shows off year-over-year mobile ad growth of around $3.2 billion.
Pachter offers more context on a robust quarter for Facebook, highlighting, “EPS benefitted from the substantial top-line upside along with better-than-expected G&A expense. Operating expenses including cost of revenue as a percentage of revenue were 36%, versus 40% last quarter and 41% in Q3:16, reflecting operating leverage partially offset by continued R&D growth associated with higher headcount and the buildout of new products.”
Overall, this momentum should continue forward, as the analyst underscores, “We expect Facebook to continue its rapid growth overseas and to increase monetization of under-penetrated Instagram, WhatsApp, and Messenger over the coming years. We view Facebook as well-positioned to defend itself from competition for user mindshare and attention from other apps, as its initiatives around the camera and augmented reality can leverage its massive user base and suite of applications to streamline adoption and drive higher engagement.”
Analysts across the Street “like” the social media empire CEO Mark Zuckerberg has created, with TipRanks analytics exhibiting FB as a Strong Buy. Based on 33 analysts polled by TipRanks in the last 3 months, 31 rate a Buy on Facebook stock, 1 maintains a Hold, while 1 issues a Sell on the stock. The 12-month average price target stands at $207.80, marking a 16% upside from where the stock is currently trading.