It doesn’t take much to send Facebook (FB) shares higher these days, as today’s response to earnings demonstrates. Facebook’s Q3 earnings reflected an earlier prediction revenue growth would slow in the second half of 2018, though net income during the period appeared unscathed by recent problems involving fake news and data breaches.
Facebook posted revenue of $13,727 billion dollars for its most recent quarter, compared with consensus estimates of $13,781 million. GAAP EBITDA was $6,888 million, compared with consensus of $7,406 million. GAAP EPS was $1.76, compared with consensus of $1.48. Net profit of $5.1 billion was up from $4.7 billion in Q3 2017.
In reaction, Aegis’ top analyst Victor Anthony reiterates a Buy rating on Facebook stock, while slightly raising the price target to $215 (from $206), which implies an upside of 40% from current levels.
According to TipRanks, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Victor Anthony has a yearly average return of 16.4% and a 65% success rate. Anthony has a 41.3% average return when recommending FB, and is ranked #57 out of 4887 analysts.
Anthony commented, “The core Facebook platform is transitioning from Newsfeed monetization to Newsfeed plus Stories monetization, with the latter opportunity expected to be bigger than the former overtime. Stories monetization on core FB has proven to be challenging, but we are convinced it can work, given that the concept has already been proven in the market. WhatsApp is beginning monetization with paid messaging and ads in Stories. Messenger monetization is beginning with sponsored and inbox ads. Core Facebook revenue growth will continue to slow due to impression growth from lower monetizing geos and products, the data privacy initiatives impact on pricing growth, and the shift from Newsfeed to Stories inventory which carries lower CPMs/lower ad loads.”
“We increased our 2019 revenue and Adj. EBITDA estimate by 1.7% each. We also rolled forward our valuation to year-end 2019, and in so doing increased our price target on the stock to $215, based on a 12.5x multiple to our 2020 Adj. EBITDA estimate of $46.6B,” the analyst added.
As of this writing, Facebook shares are rising nearly 4% to $151.50.
Wall Street’s confidence on the social media giant speaks for itself; Facebook has received a whopping 30 buy ratings in the last three months versus 6 Hold and only 1 Sell ratings. Meanwhile, the $191.52 price target suggests a potential upside of 27% from the current share price. (See FB’s price targets and analyst ratings on TipRanks)