Credit: Shutterstock photoFollowing second-quarter earnings that showed its mobile advertising strength, Facebook (FB) shares are poised to move higher, according to Deutsche Bank analyst Ross Sandler. Sandler raised his price target to $115 after the results, keeping his buy rating on the name, citing several reasons.
"Our bullish thesis is predicated on: 1) steady growth in price and ad effectiveness for core FB driving near term upside to consensus, as shown in [the second quarter], 2) further out-year estimate revisions when FB starts to monetize its other apps, and 3) little to no multiple expansion," Sandler wrote in a note. "We have slightly increased 2016 [estimates], and rolled our PT forward to $115."
In the second quarter, Facebook earned an adjusted 50 cents a share on $4.04 billion in revenue. Analysts were looking for 47 cents a share on $3.99 billion in revenue.
With nearly 1.5 billion using the service monthly, CEO Mark Zuckerberg continues to be pleased by the results his company is putting forth.
"This was another strong quarter for our community," Zuckerberg said in the press release, announcing the earnings. "Engagement across our family of apps keeps growing, and we remain focused on improving the quality of our services."
Facebook also noted daily active users rose 17% year-over-year to 968 million and mobile DAUs rose 29% year-over-year to 844 million. These are signs that not only are more people are using the service, but engagement is increasing.
Mobile continues to be the heart and soul of Facebook, with mobile ad revenue up 75% year-over-year, accounting for 76% of all ad revenue. This fact, coupled with the launch of new products and continued strength in Instagram and WhatsApp are a positive, Sandler noted, despite the slumping share price.
"Shares traded off slightly after-market consistent with previous quarters, as FB only in-lined heightened buyside expectations," Sandler penned in the note. "But similar to the past year-plus, FB remains one of the best large cap stocks to own intra-quarter as a litany of new products, innovation and user metrics drive the stock higher."
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
