Facebook (FB): Top Analyst Sets Expectations Ahead of Tonight’s Q1 Print

RBC Capital's Mark Mahaney braces himself for questions marks swirling around FB user engagement/growth- but long-term continues to back this social giant.


Wall Street will be closely watching Facebook, Inc. (NASDAQ:FB) tonight as it unveils its first quarter performance of the year- and the first print that follows the Cambridge Analytica data privacy fiasco. While one of Wall Street’s leading analysts understands all the bad buzz that has ensued on back of the leak may have swiped upside ad revenue prospects from the table, he ultimately sees no significant long-term troubles.

Top analyst Mark Mahaney at RBC Capital still anticipates Facebook can achieve current expectations, even as he spots short-term has brewed some “likely added uncertainty around user engagement and growth.”

As such, in his earnings preview, the analyst maintains an Outperform rating on FB stock with a $250 price target, which implies a 57% upside from current levels.

For the first quarter, Mahaney forecasts 14% in year-over-year monthly active user (MAU) growth to 2.20 billion. The analyst likewise a jump in daily active user (DAU)/MAU ratio quarter-over-quarter to 66.5%. In the North American market, a big one for Facebook, the analyst notes he would not be thrown to observe the latest negative media hailstorm cause a quarter-over-quarter dip in MAUs from December’s 239 million to roughly 235 million in March, or a quarter-over-quarter decrease in DAUs from 184 million in December to approximately 180 million in March. Moreover, the analyst models an ex-FX ad revenue growth rate of 39%, which would dial down from the 44% seen in the fourth quarter. In terms of GAAP operating margin, Mahaney calls for 37% and a 56% adjusted EBITDA margin.

Approaching this evening’s print, Mahaney concludes with key insights for the quarter: “1) Cambridge Analytica: […] We do believe there may be near-term pressure (Q1/Q2) on User and Engagement growth @ Facebook, given all the negative media attention on the data controversy, though do not see a material long-term impact. 2) Facebook Takeaways From RBC’s Advertiser Survey: In March 2018, RBC conducted a survey of over 750 advertising professionals to gauge sentiment in Online marketing. Overall, our survey was mixed for Facebook, with budget allocations coming in at a record high, but negative intent-to-spend results mirroring recent public sentiment. 3) Instagram Takeaways From Advertiser Survey: Overall, Instagram was the 4th most used platform (behind Facebook, Google and YouTube), and continues to have a very positive skew in terms of future spend and improving ROIs. 4) Neutral Traffic Data: U.S. Multi-Platform Unique Visitors were up 3% Y/Y in Q1, improving vs. 0% Y/Y growth in Q4. Global Traffic trends were slightly negative, however.”

Mark Mahaney has a very good TipRanks score with a 69% success rate and an impressive ranking in the top #25 analysts on Wall Street: #21 out of 4,774 analysts. Mahaney garners 22.6% in his annual returns. Investors who follow Mahaney’s recommendations on FB earn an average of 26.4% in profits on the stock.

CEO Mark Zuckerberg’s social media empire is a strong bullish favorite on the Street, according to TipRanks analytics. Out of 34 analysts polled in the last 3 months, 31 are bullish on FB stock, 2 remain sidelined, while 1 is bearish on the stock. With a return potential of 37%, the stock’s consensus target price stands at $219.33.

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