Facebook: Color on Quarter
- Needham notes FB reported strong results, overdelivering consensus estimates (again), driven by global scale, margin expansion and mobile adoption. FB reported 1Q14 revenue of $2.5B (up 72% y/y and 10% above firm's estimates), and Non-GAAP EPS of $0.34 (up 172% y/y and 42% above firm's estimates). Needham is raising it's 2Q14 estimates to align with FB's comments. Firm retains BUY rating and $65 tgt.
- Stifel Comments-Positives : 1) Revenue came in ahead of consensus estimates, and ad revenues showed the highest growth rate in nearly three years. 2) Incremental EBITDA margins were an impressive 80% and co generated over $900mn in FCF. 3) Engagement (DAU/MAU) continued to rise coming in at 62.9% vs. 61.6% in the prior quarter. Negatives: 1) CFO David Ebersman announced his resignation in the middle of a year, while offering only slight explanations. 2) While the quarter was strong the magnitude of the revenue beat was lower than it has been in the prior three quarters. 3) Management reiterated commentary from recent quarters suggesting that the growth in ad revenues will decelerate. 4) The company added only 1mn users in the U.S. and Canada. Reducing Target Price from $82 to $80.
- FBR Capital notes FB delivered outstanding results across metrics. Results are supportive of firm's thesis of price inflection. Forward comments touched on expected ad growth moderation-widely expected and reflected in Street estimates and a function of the 2Q13 ramp-up in news feed ads. Increasing 2014 EPS estimate to $1.40 (previously $1.26) and 2015 EPS estimate to $1.89 (previously $1.67). Note estimates include acquisition share dilution and assume a mid-2Q close on Oculus and a mid-3Q close on WhatsApp. New tgt is $77 (previously $66).
- Oppenheimer is raising price target to $79 from $70 following 1Q EBITDA 22% above Street. Upside was driven by higher monetization from direct response ads and gross margins. Improved monetization was driven by higher demand for Newsfeed ads from inventory cap. While ad revenue increased 82% y/y, we note that Newsfeed ads ramped in 2Q13, and comps will be more difficult. Raising 2014E revenue and EBITDA by 6% and 7%, respectively.
- RBC Capita is raising 2015 Non-GAAP EPS from $1.73 to $2.14. Raises tgt to $86 from $76.Firm notes co accelerated its fundamental growth (again) from what firm saw as inflection point quarters. User growth remains robust, while engagement continues to increase. Mobile growth continues to drive Ad Revenue. The most important Internet trend by far is MOBILE, and Facebook has become a MOBILE company (Mobile now almost 60% of revenue). FB is also demonstrating nice operating leverage and Opex discipline.