- Aegis Capital raises tgt to $155 from $150. Facebook delivered a stellar quarter that exceeded estimates across the board with 53% ex-FX advertising revenue growth, as the platform, along with Instagram, is taking advertising share. User growth remains solid and overall engagement increased slightly, which is notable given rising competition from Snapchat. Expense guidance was quantified at 40%-50% for GAAP and 47%-57% for non-GAAP (firm had modeled 52.5% non-GAAP entering the results vs mid-40% for consensus). Consistent with the past, expects expenses to come in below guidance.
- Needham Research notes FB reported strong 4Q16 results, rev of $8.8B, 4% above estimates, and Non-GAAP EPS of $1.41, 9% above estimates. In firm's view, the soundtrack of FB's current strategy? should be the children's song "Anything you can do, I can do better." Within its video tab, FB is clearly targeting YouTube viewers and TV ad spending. Instagram stories and effects and live video emulate Snap's core competence. Buy button experimentation emulates Amazon. Recommendations mirror Yelp, OpenTable, and TRIP. A key FB advantage is it can roll out new offerings to 1.9B MAUs virtually overnight, after another company has iterated to create a successful product.
- Stifel Research raises tgt to $165 from $155. Facebook beat consensus revenue/EPS by 3%/8% as the company's advertising business maintained its impressive momentum. Despite a difficult y/y comparison with 4Q:15, advertising revenue grew +54% y/y ex-FX to $8.63B. Management guided 2017 GAAP / non-GAAP operating expense growth of 40%-50% / 47%-57% y/y, which was on the high-end of consensus expectations. Despite these investments, firm expects growth in the core business along with ramping contributions from video ads, Instagram, and Messenger / WhatsApp to fuel above-market ad revenue growth for the next several years.
- Mizuho Securities raises tgt to $148 from $146. FB is entering an investment year, and firm believes the company will need to successfully pivot to video to stem decelerating revenue growth in 2017 and beyond. With Op Ex increasing materially and ad loads decel'g materially, Facebook will need to push users to spend more time through more engaging video content, which in turn should allow the company to push high-CPM video ads across its ~1.9b user base. Firm thinks reaction to the guide will be mixed, and the stock could trade flat to down. However, FB has a penchant investing appropriately and firm could see higher revenue prospects if video ramps up quickly.
- Pivotal Research lowers tgt to $135 from $147; Cuts to Hold from Buy. Facebook reported yet another very good quarter for 4Q16, with +53% ad revenue growth, as reported. Margins were also strong, with adjusted EBITDA of 68%. However, guidance on expense growth and capital expenditures for next year was higher than its previously forecast. Accounting for these factors, valuation on a YE2017 basis falls to $135 from $147, which is only slightly above current trading levels. Guidance for expense growth provided by management for 2017 reflects an expected acceleration from 2016 levels. GAAP expenses are expected to grow between 40-50% while non-GAAP expenses are expected to grow between 47-57%. By contrast, firm previously expected growth of +31% on a GAAP basis and +43% on a non-GAAP basis. Similarly, capital expenditure expectations for 2017 of $7-7.5bn were also higher than its prior $6bn forecast.