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Goldman Sachs On Facebook: Conservatism Or Realism?

Goldman Sachs On FB: Conservatism Or Realism?

Goldman Sachs’ Heather Bellini maintains a Buy rating on the company, with a price target of $162.

Q3 Beat

Facebook reported Q3:16 revenue of $7.01 billion, representing 56 percent year-on-year growth and beating the consensus forecasts.

Ad revenue grew 59 percent year-on-year to $6.82 billion, again beating the consensus expectations. The company had reported the second largest beat in absolute dollar terms in Q2.

Non-GAAP operating margins came in at 59.3 percent, ahead of expectations, driven by revenue upside and cost controls.

Facebook’s non-GAAP EPS also beat expectations at $1.09, while below the line items served as a tailwind.

Near-Term Concerns

“Given concerns that newer, competitive platforms were starting to impact engagement metrics in the U.S. in particular, we see the ARPU metric as helping to refute this,” Bellini stated.

Facebook shares had traded down three days in a row preceding the announcement of the Q3 results.

On the other hand, management’s commentary that ad load was unlikely to be a significant driver of ad revenue growth in H2:CY17 has led to investor “consternation” regarding revenue growth deceleration in CY17.

In fact, an article in Financial Times stated that following beat results for 14 successive quarters, Facebook now expects “hit the limit it has set on the number of advertisement that can be shown in the main app’s news feed” by mid-2017.

At last check in Thursday's pre-market, Facebook was beginning to rebound from sub-5.5 percent losses, sitting at $121.38 and down 4.5 percent.

Nov 2016WedbushMaintainsOutperform
Nov 2016UBSMaintainsBuy
Nov 2016JefferiesMaintainsBuy

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