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Facebook Bulls Grow More Emphatic as Zuckerberg Delivers

Ryan Vlastelica
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Facebook Bulls Grow More Emphatic as Zuckerberg Delivers

(Bloomberg) -- Facebook Inc. analysts were essentially unanimous in their praise of the social media company’s first-quarter results, in which it reported strong revenue growth and user engagement.

The results, along with a signal that it may be close to resolving a U.S. privacy investigation, were seen as moving the company past a series of controversies that have weighed on the stock for several months. As RBC Capital Markets wrote, the company could “could be in a period of sustained re-rating,” as the worst fears “appear not to have been realized.”

More than ten firms raised their price targets on the stock, while UBS upgraded its view, reinforcing the dominance of Facebook bulls on Wall Street, where roughly 80 percent of the analyst ratings are buy-equivalents. The average price target currently stands at around $216, according to data compiled by Bloomberg, up from $198 on Tuesday.

Shares gained as much as 8.7 percent in early trading, setting the stock up for its highest close since July. The stock has gained about 60 percent from a December low.

Here’s what analysts are saying about the results:

JPMorgan, Doug Anmuth

The quarter represented another time “in which FB showed its ability to maintain strong engagement & also effectively manage revenue deceleration, which should give the Street increased confidence going forward.”

Affirmed overweight rating and the company’s “best idea” status. Price target raised to $245 from $210.

What Bloomberg Intelligence Says

Facebook’s sales growth “amid pricing headwinds from the transition to Stories underscores the tech titan’s ability to manage long-term growth, with ad volume offsetting lower rates.”

--Jitendra Waral, technology analyst Click here for the research

Goldman Sachs, Heather Bellini

“We expect both geographic mix shift and Instagram Stories pricing to have a deflationary impact on pricing overall over the course of 2019.”

Excluding the FTC settlement, “GAAP operating margins would have been 42 percent (vs. 22 percent reported) which easily surpassed the Street forecast of 35.9 percent.” GAAP earnings would also have topped expectations when this settlement is excluded.

Affirmed buy rating, price target increased to $228 from $200.

Deutsche Bank, Lloyd Walmsley

“We feel better about Facebook’s medium term top line trajectory given lower-than-feared deceleration in 1Q (2.2ppts), skepticism around management’s guidance for greater 2H sequential growth deceleration, increased advertisers in Stories (3M vs 2M last quarter), and reduced customer concentration.”

There’s still a longer-term risk surrounding privacy issues, “though we still view this as largely an incremental use case not broadly cannibalistic.”

Affirmed buy rating, target raised to $220 from $205.

Barclays, Ross Sandler

“We still see FB as one of the more compelling ideas in mega cap Internet.”

“The tone of the call was upbeat and [CEO Mark] Zuckerberg did a very good job explaining his longer-term vision.”

Affirmed overweight rating, price target increased to $240 from $210.

Morgan Stanley, Brian Nowak

The results speak “to its continued ability to drive monetization of its old (newsfeed) and new (Stories) engagement formats,” and this kind of innovation “will further extend its growth runway.”

Price target raised to $210 from $195. Affirmed overweight rating.

“We see a potential key debate in FB’s expectation for continued ad revenue growth deceleration throughout 2019 (even through easing Y/Y comps) and more pronounced ad targeting headwinds in the second half.”

Citi, Mark May

“We see a combination of solid topline growth and improving expense trends.”

Affirmed buy rating, target increased to $212 from $185.

RBC Capital Markets, Mark Mahaney

“We have greater conviction that FB could be in a period of sustained re-rating, as the worst FB Fears appear not to have been realized.”

Affirmed outperform rating, target raised to $250 from $200.

Nomura Instinet, Mark Kelley

“The user trends across all geographies were largely positive as were the advertising revenue trends.”

Affirmed buy rating, target raised to $226 from $215.

UBS, Eric Sheridan

Upgraded to buy from neutral, citing Instagram’s “outsized” user engagement and revenue growth. Price target raised to $240 from $170.

(Updates stock activity and chart to market open; adds BI commentary.)

To contact the reporter on this story: Ryan Vlastelica in New York at rvlastelica1@bloomberg.net

To contact the editors responsible for this story: Catherine Larkin at clarkin4@bloomberg.net, Steven Fromm, Morwenna Coniam

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