Facebook Q3 earnings: Analysts’ reactions round-up

Mark Zuckerberg happyFacebook CEO Mark Zuckerberg.Getty

  • Facebook reported its third-quarter earnings on Wednesday, blowing previous badysts’ expectations.
  • It warned that it deliberate to speculate closely in safety, reducing into income — however badysts aren’t apprehensive by the information.
  • Across the board, badysts are upping their worth goal for the inventory and urging shoppers to speculate.

Facebook on Wednesday introduced its earnings for the third quarter of 2017 — and it crushed it.

It blew previous badysts’ expectations, hitting $10 billion, or £7.5 billion, in quarterly income for the primary time (versus an anticipated $9.84 billion), whereas its earnings got here in at $1.59 a share ($1.28 anticipated).

But these outcomes had been tempered with a warning: Facebook says it plans to speculate sufficient in safety within the coming months to harm the corporate’s backside line. “I am dead serious about this,” CEO Mark Zuckerberg stated on the earnings name.

After reaching all-time highs earlier within the day, the social community’s inventory dropped 2% in after-hours buying and selling on the information — however badysts aren’t apprehensive.

In badysis notes to shoppers, badysts from funding banks and monetary corporations throughout the board are portray a rosy image of Facebook’s future, usually upping their worth targets for the inventory and urging folks to speculate.

“Security and investment will get the headlines, but what matters more is the video strategy,” Macquarie wrote. “If it works, we see continued upside for FB.”

Baird shrugged off the extra funding as “prudent steps,” whereas Jeffries agreed: “Conservative guide doesn’t phase us. One of our top [large chip] picks.”

Only one of many badysts’ notes Business Insider reviewed truly lowered its worth goal. That was Credit Suisse, which modestly decreased it from the already-very-bullish $235 (£177) to $230 (£173). Facebook’s inventory at present sits at about $182, whereas the vast majority of badysts’ targets are about $200 to $210.

In brief, whereas Facebook been within the firing line not too long ago over how Russian operatives exploited the platform to unfold misinformation and propaganda to greater than 120 million Americans, traders and badysts aren’t apprehensive.

Citi stated that whereas Facebook administration might “be criticized for not being proactive enough, we view its current handling of the Russia-related issues as responsible and immaterial to the financial outlook.”

Keep studying to see an entire roundup of badysts’ reactions to Facebook’s Q3 earnings, however first, listed here are the important thing numbers:

  • Revenue: $10.33 billion (£7.eight billion) versus $9.84 billion (£7.four billion) anticipated, up 47% from the year-ago interval.
  • Earnings per share (GAAP): $1.59 (£1.20) versus $1.28 (£zero.97) anticipated, up 77% from the year-ago interval.
  • Monthly energetic customers: 2.07 billion, up from 2.01 billion final quarter.
  • Daily energetic customers: 1.37 billion, up from 1.32 billion final quarter.

Credit Suisse: BULLISH

Rating: Outperform

Price goal: $230 (beforehand $235)

Comment: “Our investment thesis remains unchanged: 1) Facebook will be able to drive long term revenue growth without a material lift in ad loads, 2) Street models continue to underestimate the long-term monetization potential of upcoming new products (Graph Search), 3) optionality/upward bias to estimates from multiple other products including Messenger and WhatsApp.”

Jeffries: BULLISH

Rating: Buy

Price goal: $225 (beforehand $215)

Comment: “FB is growing nearly 2x the rate of its large cap internet peers while delivering 50%+ operating margins and the stock is up nearly 59% YTD. FB remains our top large cap internet pick and we think that momentum in the name can continue through the end of the year. We see upside to ARPU, MAUs, and Instagram and continue to watch potential margin compression, testing on Video, and investment in security.”

SunTrust Robinson Humphrey: BULLISH

Rating: Buy

Price goal: $210

Comment: “These results show market share gains not only from traditional Media companies, but from digital platforms as well; and as we’ve been suggesting, value and market share gains within IDM continue to accrue to the largest players.”


Rating: Buy

Price goal: $210 (beforehand $200)

Comment: “While mgmt continues to temper expectations, fundamentals remain quite strong and we not only see multiple levers of new growth but also see mgmt’s 2018 opex growth guidance as unobtainable. Moreover, while mgmt can be criticized for not being proactive enough, we view its current handling of the Russia-related issues as responsible and immaterial to the financial outlook. All told, we are raising our revenue forecasts but lowering near-term margins and EPS to reflect mgmt’s 2018 opex guide.”

Macquarie: BULLISH

Rating: Outperform

Price goal: $205 (beforehand $190)

Comment: “The backside line is that regardless of mbadive anticipated investments in ’18, we’re elevating numbers. FB’s distinctive choices for advertisers are resonating and so long as customers are there, advertisers will observe. While the dialogue round safety and elevated spend will generate a ton of media, the actual concern for the mannequin is that if the video technique will succeed. If it does, and FB is ready to construct a legit YouTube challenger, the elevated safety spend shall be a pace bump.”

Piper Jaffray: BULLISH

Rating: Overweight

Price goal: $200 (beforehand $195)

Comment: “Mgmt clearly indicated it is electing to badume responsibility for content on its platform, leading to investments in “security and safety,” and will increasingly pay for content (initially via licensing and increasingly via a rev share with content creators). Separately, the company’s investments in 10-year technology (AI, AR/VR, etc.) are driving continued OPEX and expansion of owned datacenters is driving a step function higher CAPEX in 2018. We believe this will spark the question of whether Facebook has been over- earning, but the company is ultimately guiding for investment growth it cannot reach.”

Morgan Stanley: BULLISH

Rating: Overweight

Price goal: $200 (up from $195)

Comment: “More impressive, FB is delivering this cash flow even while aggressively investing in headcount, ad measurement/improvement, augmented reality, virtual reality, video content, Instagram, Messenger, Whatsapp, Aquila, among other items. We believe this ability to continue to invest in new initiatives will widen FB’s competitive lead vs. other platforms…and over time will likely lead to sustained stronger cash flow growth.”


Rating: Outperform

Price goal: $200 (beforehand $185)

Comment: “With supply/demand dynamics driving higher pricing, concerns over ad load headwinds should subside, with investor focus shifting to the significant security/content investment ramp in CY18 (modeling expense growth +50% Y/Y), which we view as prudent steps aimed at preserving platform integrity in the minds of users(and regulators).”

William Blair: BULLISH

Rating: Outperform

Price goal: n/a

Comment: “Over the next 12 months, we believe there is 15%-plus upside to shares based on EBITDA growth. We maintain our Outperform rating.”

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