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Top Analyst Says Facebook (FB) Valuation Modest Considering its Strong Growth Opportunities

Though Monness Crespi's Brian White understands the Cambridge Analytica fiasco will drag FB shares short-term, valuation is enticing.


Top analyst Brian White at Monness Crespi believes the scope of Facebook, Inc. (NASDAQ:FB) and its social network ecosystem is large enough to evade the fallout from the Cambridge Analytica data privacy scandal. Though some users and advertisers may be frustrated enough to run for the hills, ultimately this tech titan’s size is going to be tough for advertising brands to turn a blind eye.

As such, evaluating encouraging breathing room and fresh prospects for the company to bolster its user base, the analyst is transferring coverage of FB with a Buy rating while lowering the price target from $210 to $200, which implies a 19% upside from current levels.

“The size of Facebook’s user base and significant free cash flow generation provide the company with the economies of scale, data access and financial resources to make the platform even more compelling for users relative to its peers in the future,” highlights the analyst, who likewise spotlights a bullish trajectory for further innovation in areas of virtual reality (VR), augmented reality (AR), and artificial intelligence (AI).

Meanwhile, between 1.5 billion in monthly active users (MAUs) for WhatsApp by the fourth quarter, 500 million daily active users (DAUs) for Instagram in the third quarter, and more than 1.2 billion MAUs this time last year for Messenger, the analyst surveys “strong traction” outside core Facebook; all with monetization that could take a step up down the line.

White concludes on an upbeat note: “Given Facebook’s status as the #1 social network destination on the planet and the digital transformation trend unfolding in the advertising world, we believe the company can continue to deliver attractive growth rates for investors and the stock’s valuation is modest for its growth prospects. Moreover, the company’s profit metrics are the highest in our coverage universe. Although we expect the Cambridge Analytica scandal to dampen near-term user metrics, drive a constant flow of negative news and result in some regulatory changes, we believe the valuation makes the stock a compelling BUY at current levels.”

For 2018, the analyst is calling for a 34% year-over-year vault in growth for the titan to $54.61 billion and a 34% jump in year-over-year growth in EPS to $7.23. Glancing ahead to next year, the analyst looks for a 24% surge in year-over-year growth in revenue to $67.70 billion and a 19% lift in year-over-year EPS growth to $8.61.

Brian White has an impressive TipRanks score with 68% success rate and a top 100 ranking on Wall Street: #65 out of 4,767 analysts. Notably, White realizes 15.6% in his yearly returns.

Facebook shines as a bullish favorite on Wall Street, based on TipRanks analytics. Out of 33 analysts polled in the last 3 months, 30 rate a Buy on FB stock, 2 maintain a Hold, while 1 issues a Sell on the stock. The 12-month average price target stands tall at $219.82, marking a solid 32% in return potential for the stock.