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Bob Peck Reiterates $142 Facebook Target, Says It Has Long Runway

SunTrust’s Bob Peck reiterated his Buy rating and $142 target price on Facebook IncFB 4.74% even as investors weigh forward commentary of a “meaningful” revenue deceleration and “significant” investments.

Facebook said ad loads would be less of a driver going forward and noted “meaningful” slowdown in revenue growth rates (versus 50 percent average over the past two years). The company also said 2017 would be a “significant” investment year.

Peck estimates about 20 point deceleration in 2017 similar to Street estimates and believes his estimate for about 47 percent operating expense growth captures a reasonable expansion in spending of about $4 billion versus $2.4 billion increase in 2016.

Accordingly, Peck raised his FY 2017 revenue/EBITDA/EPS estimates slightly to $36.5 billion/$22.3 billion/$5.02 from $35.1 billion/$21.4 billion/$4.73.

Meanwhile, the social media giant reported">third quarter non-GAAP earnings of $1.09 a share on revenue of $7 billion, which topped Street view of $0.97/$6.92 billion. The company delivered 59 percent growth in ad revenues and showed meaningful margin beat.

Daily active users (DAUs) rose 17 percent to 1.18 billion on average, while monthly active users (MAUs) advanced 16 percent to 1.79 billion.

Mobile DAUs increased 22 percent to 1.09 billion on average and mobile MAUs came in at 1.66 billion, an increase of 20 percent year-over-year.

“With Instagram monetization still ramping, video strategy evolving and ~2B users on Messenger and WhatsApp yet to be monetized, we believe Facebook has a long runway,” Peck wrote in a note.

Nov 2016Wells FargoMaintainsOutperform
Nov 2016BTIG ResearchDowngradesBuyNeutral
Nov 2016Cantor FitzgeraldMaintainsBuy

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