Facebook Inc (FB) Wants to “Temper Some Expectations” With Outlook

Facebook Inc NASDAQ:FB

Facebook Inc comments that its growth could slow down later this year, created a sort of panic among the investors, but analyst Gene Munster thinks the investors are overreacting. During the earnings call on Wednesday, Facebook CFO David Wehner said the ad revenue growth rate could slow down in the future quarters.

Facebook Inc NASDAQ:FB

Investors may be wrong

However, Piper Jaffray’s analyst told CNBC that Wall Street has already factored the growth of 40% and 38% in the third and fourth-quarter, respectively. “I think [Wehner] was just trying to temper some expectations,” Munster said in a “Squawk Box” interview.

The firm posted adjusted 2Q earnings of 50 cents per share on $4.04bn in revenue against the Wall Street expectations of 47 cents per share on $3.99bn. Shares, however, took a dip of 4% on Thursday, despite above expected earnings.

Munster said investors should not expect Instagram and Facebook’s other messaging apps to start paying off anytime soon. The analyst said that next year the firm will try to drive revenue from Instagram, and probably continue the same policy with Messenger and WhatsApp in 2017 and beyond.

Facebook knows what it is doing

Rising cost was also a concern among the investors as total expenses for the firm came in at $2.77bn, an increase of 82% from last year. On this, RBC Capital Markets, Mark Mahaney said on Thursday that the firm has managed its investment with precision.

“This is still early stage for Facebook . The bigger mistake would be under-investing, not over-investing,” the analyst told “Squawk on the Street.”

Mahaney said unlike Google, the social network is better in guiding and then achieving or beating those expense goals. Even though Mahaney expects “pretty solid deceleration,” he says it will be consistent and moderate.

Apart from these two, many other analysts have also come out with their verdict on Facebook. In a note on 30 July, Sterne Agee CRT reaffirmed a Buy on the stock, and raised the price target to $110 from $92. JMP Securities gave a Buy with a price target of $105, in a note on July 30.

Rosenblatt Securities, in a note on the same day, raised the price target on Facebook from $100 to $115 with a Buy rating. BMO Capital Markets and JPMorgan Chase & Co. also raised the price target on the stock to $94 and $118. Currently, Facebook  has an average rating of Buy and a consensus price target of $104.94.

On Thursday, Facebook shares closed down 1.84% at $95.21. Year to date the stock is up over 20% while in the last 12 months the shares are up almost 27%.

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Aman is MBA (Finance) with an experience on both marketing and Finance side. He has work as a Risk Analyst for AIR Worldwide, and is currently leading VeRa FinServ, a Financial Research firm. Favorite pastimes include watching science fiction movies, playing PC games and cricket.

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