Argus analysts weighed in on social media giant Facebook Inc (NASDAQ:FB) and financial giant Citigroup Inc (NYSE:C) with mixed ratings. The analysts reflect on Facebook’s recent developer conference, and Citigroup’s 1Q16 earnings results. Let’s take a closer look.
Joseph Bonner, a New York-based analyst at Argus, reiterated a Buy rating on shares of Facebook with a price target of $130, after the company recently held its annual F8 developer conference, introducing new products and delving deeper into the company’s strategic plan for the next ten years.
Bonner wrote, “We think that Facebook, with the two most popular smartphone applications in the U.S., has successfully made the transition from desktop to mobile. It is also gaining traction on monetization through increased advertising, broadening its appeal to users, and entering new areas such as virtual reality and messaging. Although the launch of the Oculus virtual reality headset may cut into near-term margins, we expect Facebook to remain the dominant social media site.”
“Over the next ten years, Facebook plans to focus on three broad technological areas. The first of these is virtual reality/ augmented reality (VR/AR), as exemplified by the Oculus VR and Gear VR systems. Second, the company will focus on internet connectivity — with the goal of connecting more than 4 billion potential Facebook users who currently have no access to mobile broadband, who are too poor to afford a handset, or who are simply unaware that Facebook exists. The company’s third focus area is artificial intelligence, which has already begun to underpin some new applications,” the analyst continued.
According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Joseph Bonner has a yearly average return of 8.9% and a 69% success rate. Bonner has an 18.4% average return when recommending FB, and is ranked #387 out of 3880 analysts.
Out of the 41 analysts polled by TipRanks, 37 rate Facebook stock a Buy, 3 rate the stock a Hold and 1 recommends a Sell. With a return potential of 23%, the stock’s consensus target price stands at $135.18.
Argus analyst Stephen Biggar maintained a Hold rating on shares of Citigroup, after the US bank released its first-quarter earnings results, posting adjusted earnings of $1.10 per share, down from $1.51 a year earlier but $0.08 above the consensus estimate. Net income fell 27%, hurt by weak capital markets revenue and a reserve build for energy-related credits.
Biggar commented, “In our view, Citi remains a work in progress as it attempts to get better control of expenses and improve its efficiency ratio, wind down assets at Citi Holdings, and increase shareholder returns, especially in the form of higher dividends. Financial metrics for the basic lending businesses have improved modestly, but were overshadowed in 1Q by weak capital markets business lines, especially investment banking and equity markets, as well as by a reserve build for energy-related loans.”
“Cost-savings initiatives remain a key theme in 2016, with the company taking another large repositioning charge in 1Q to streamline operations. Citi continues to operate at profitability levels below some peers, and a challenging capital markets environment has not helped revenue. In addition, the balance sheet is not expected to grow as the company unwinds troubled loans, meaning that net interest income is unlikely to be a good source of growth. On the bright side, capital levels are much stronger after several quarters of improving profitability. Nevertheless, we would steer investors towards banks with better revenue growth and asset quality,” the analyst concluded.
According to TipRanks.com, analyst Stephen Biggar has a yearly average return of -5% and a 50% success rate. Biggar is ranked #3033 out of 3880 analysts.
Out of the 11 analysts polled by TipRanks, 7 are bullish on Citigroup’s stock, while 4 remain on the sidelines. With a return potential of 24%, the stock’s consensus target price stands at $56.