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Facebook Inc (FB): Wedbush Initiates Coverage at Outperform

By Howard Kim

On October 2nd, analyst Michael Pachter from Wedbush assumed coverage on Facebook Inc. (NASDAQ:FB) with an Outperform rating and a price target of $115.

Referring to Facebook’s phenomenal growth over the past 10 years, Pachter said, “We expect Facebook to continue to grow its active user base over the next 10 years.”

Pachter is positive about the growth of the website’s Monthly Active Users (MAUs) in the various assets of Facebook, such as Instagram, WhatsApp, and the Messenger service. He says, “The Company has taken its Instagram user base from an estimated 30 million MAU in mid-2012 to over 400 million MAU today. Similarly, its WhatsApp user base has grown from 400 million MAU in late 2014 to over 800 million today. Facebook’s Messenger service has grown to over 700 million MAU in less than a year.”

Over the next few years, Pachter expects “the company to grow the engagement and monetization of users on these three platforms rapidly.” He also expects Facebook to continue to “to grow its ARPU globally as it delivers an increasingly media-rich suite of advertisements.”

Pachter’s rating takes into account two additional elements, “(1) Facebook’s consistent success in increasing user engagement, the frequency in the delivery of ads, and ad rates per view; and (2) its impressive EBITDA contribution margin on revenue growth of 80 percent.”

Facebook is expected to announce its Q3 earnings on November 4.

As per TipRanks, out of 39 analysts who have recently rated the stock, a vast majority of them; 37; have rated it as a Buy while only 2 have rated Facebook as a Hold. The average consensus 12-month price target for the stock is $112.58, an upside of 22.28%.

Michael Pachter has rated Facebook 15 times since October 2014. Out of 15 ratings for the stock, Pachter has a success rate of 71% and an average return on the stock of 55% when measured over a one-year horizon and no benchmark.