Facebook Bulls See More Gains as Zuckerberg Goes on Offense

(Bloomberg) -- Facebook Inc. rallied more than 12 percent on Thursday, one day after it reported revenue that topped analyst expectations, a sign that Mark Zuckerberg’s company is moving past a number of privacy scandals that have crushed the stock for months.

Analysts cheered the results, with a number of brokerages arguing that the social-media company was “switching from playing defense to offense,” in the words of Credit Suisse’s Stephen Ju. More than a dozen firms reacted by raising their price targets on Facebook; the average currently stands at $192, up from $184 on Tuesday, according to data compiled by Bloomberg.

Facebook gained as much as 14 percent to its highest level since September, on track for its biggest one-day percentage gain in three years. The results also lifted other social-media stocks, with Snap up 2.7 percent and Twitter gaining 4.1 percent. The Global X Social Media ETF rose 2.7 percent and hit its highest since October.

Here’s what analysts are saying:

BofAML (Justin Post)

“Overall, a solid quarter given 4Q drumbeat of negative press, with q/q growth in U.S. [daily active users] alleviating a big concern.”

“Fundamentally, we believe FB’s systems are in a better place (ie few 2018 US election issues), FB appears to be on a strong revenue trajectory between Instagram momentum and Messenger monetization, expense growth is likely at a y/y peak, and the FB news flow seems more likely to get better than worse.”

Raises price target to $205 from $190 and affirms buy rating, saying the company remains a top 2019 pick.

JPMorgan (Doug Anmuth)

The revenue upside came with “no visible impact from negative press cycle.” The quarter was one “in which FB showed it could focus on both security and the business side together, which was evident in results.”

Raises price target to $210 from $195. Affirms overweight rating and Facebook’s “Best Idea” status.

Barclays (Ross Sandler)

Results were “the kind of print that should start to restore confidence in the durability of FB’s business and bring investors back who have abandoned the name in 2018.”

Numbers for the current year “are largely de-risked and heading higher, and the conversation will slowly shift from ’putting out fires’ to ’back to innovation.’ ”

Price target lifted to $210 from $180. Reiterates overweight rating.

Morgan Stanley (Brian Nowak)

The better-than-expected revenue, earnings and active user results speak “to the strength of its engagement, ad offering and ability to drive earnings power... even while navigating public scrutiny and aggressively investing to improve its platform safety/security, product offerings and monetization.”

“Further improved Stories monetization could bring a double-barreled benefit to ad revenue growth.”

Lifts price target to $190 from $175 and keeps overweight rating.

Credit Suisse (Stephen Ju)

“The most important takeaway was the more offensive stance toward product development and revenue-generating initiatives vs managing security/content issues.”

“We would not be surprised to see ad impressions see faster increases [in Stories] as Facebook looks to drive faster revenue growth.”

Increases price target by $2 to $210. Keeps outperform rating.

Jefferies (Brent Thill)

“After playing defense in ’18, FB is shifting gears to offense, investing in core products to drive monetizable engagement. After a year of consistently negative headlines, we believe that FB is investing more in the monetization opportunities ahead of itself.”

“Impressed” with growth in both daily active users and average revenue per user across all geographies.

Price target raised to $200 from $180. Keeps buy rating.

RBC Capital Markets (Mark Mahaney)

“We feel we could be in a period of sustained rerating as the worst FB fears appear not to have been realized.”

Company has “an intrinsically very attractive valuation (19x ’20E GAAP P/E), very strong fundamentals ($15b in FCF even in deep investment mode), and a compelling value proposition to both consumers (2.7B and counting...) & advertisers.”

Price target raised by $10 to $200. Rated outperform.

Raymond James (Aaron Kessler)

Maintains outperform rating and boosts price target to $200 from $180 on “increasing monetization of newer platforms” like Instagram, along with an attractive valuation.

PiperJaffray (Michael Olson)

Results were an “antidote for barrage of negative news.”

“With the increased spend on screening/security in 2019 now factored into Street models, along with evidence (Q4 results) that neither users nor advertisers are abandoning Facebook properties, investors will be emboldened to take a more optimistic view of FB shares in the midst of what has been a tidal wave of negative news flow.”

Keeps overweight ratings, lifts price target to $195 from $190.

Nomura Instinet (Mark Kelley)

“The shift to Stories appears to be happening much faster than we thought (500mn DAUs on IG Stories, impressions driving growth), eCommerce is going to be a big focus area this year, and after another investment year in 2019, Opex growth should mirror revenue growth.”

Keeps neutral rating but lifts price target to $172 from $148.

Bloomberg Intelligence (Jitendra Waral)

“Facebook’s Stories growth should set it up to outperform consensus in 2H as Stories push News Feed ads with automatic placements.”

“Paid messages and Instagram’s e-commerce efforts, both with strong prospects, may need several quarters before revenue visibility improves.”

SunTrust Robinson Humphrey (Youssef Squali)

“Negative publicity around data privacy and regulation do not seem to detract advertisers/users from the platform.”

“While regulatory/macro concerns remain, and mgt guided to further revenue decel/margin contraction in FY19, we find FB compelling” given an attractive valuation and monetization improvement potential in 2019 and 2020.

Keeps buy rating, lifts price target to $210 from $200.

Canaccord Genuity (Maria Ripps)

“Given that it’s still early days for Story monetization, along with the format’s attractive pricing and high-engagement, fully-immersive nature, we think that Facebook may be able to increase monetization faster than most investors expect.”

Raises price target to $200 from $180 and affirms buy rating. “We continue to like the long-term growth outlook.”

To contact the reporter on this story: Ryan Vlastelica in New York at rvlastelica1@bloomberg.net

To contact the editors responsible for this story: Catherine Larkin at clarkin4@bloomberg.net, Scott Schnipper, Jeremy Herron

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