The strong second-quarter results of Facebook Inc reinforced the bullish thesis of SunTrust's Robert "Bob" Peck, as the social media giant's quarterly numbers trumped the estimates of both Peck and the Street handsomely.
Q2, In Review
Facebook's second-quarter EPS/revenue of $0.97/$6.44 billion was higher than the Peck's estimate of $0.83/$6 billion and consensus estimate of $0.82/$6.02 billion.
"Facebook's 2Q report refuted the growing concerns that rising competition was stagnating user growth and monetization. Not only did Facebook report higher DAUs across all regions with accelerating monetization, but it did so on higher incremental operating margins of 64 percent," Peck wrote in a note.
Ad revenue growth was 63 percent year-over-year (20 percent quarter-over-quarter), ahead of the Street. DAUs added came in at 38 million quarter-over-quarter and 160 million year-over-year, growing 17 percent and improved across all geographies. Mobile DAUs are now greater than 1 billion. In addition, double-digit growth in time spent underscored engagement.
Meanwhile, the analyst highlighted that ad loads will be less of a driver going forward from the double digit growth in the second quarter.
While "sharing was up" across properties, original post sharing on the Facebook main news feed is unclear. Also, there remains ambiguity over Instagram user growth in the United States.
"Tougher revenue comps begin in 2H'16 and flow into 2017 — implying continued ad revenue growth deceleration," Peck continued.
However, the analyst raised his FY2016 revenue/EPS estimate to $26.7 billion /$3.86 from $26.1 billion/$3.65. Peck also increased his full-year ad revenue forecast to $26.4 billion from $26 billion.
"With ~2 billion users on Messenger and WhatsApp yet to be monetized, we believe Facebook has a long runway. We reiterate our Buy and raise our target to $142 (from $135)," Peck noted.