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Facebook (FB) Buy Rating Reiterated at Goldman Sachs

December 19, 2014 9:36 AM EST
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Price: $196.64 --0%

Rating Summary:
    46 Buy, 17 Hold, 2 Sell

Rating Trend: = Flat

Today's Overall Ratings:
    Up: 20 | Down: 14 | New: 22
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Goldman Sachs reiterated a Buy rating on Facebook (NASDAQ: FB) with a price target of $85. Analyst Heather Bellini discussed Facebook's 2015 expense guidance.

"FB forecasted CY15 total expense growth (COGS + Opex) to fall within a range of 50-70% yoy growth vs consensus at the time of the 3Q14 call for these items to increase 38%. While this growth rate is higher than what we have seen to date (CY14E expense growth guided to a range of 30-35% and CY13 growth of 44%), it is the size of the range that also warrants a closer look. Since going public, FB had always guided expense growth to fall within a 5pt band. In this note, we highlight our thoughts on what the key variables are that will determine total expense growth in 2015," said Bellini.

"Facebook has numerous factors that will impact their COGS growth in 2015, including: 1) core COGS growth adjusting for the lease abandonment benefit impacting CY14, 2) depreciation from its new HQs, 3) depreciation from new data centers, 4) the potential timing and number of units of Oculus hardware it will sell. The last point is likely the primary reason for such a wide range of expense growth guidance. Aside from COGS, we expect FB to continue to hire aggressively. In the note, we detail assumptions around the potential drivers of COGS as well as operating expenses as we head into 2015," continued the analyst.

"While we view CY15 as an investment year, we have confidence that top line estimates will see material upside. Further, we have high conviction around FB’s ability to monetize many of these initiatives going forward," she added.

For an analyst ratings summary and ratings history on Facebook click here. For more ratings news on Facebook click here.

Shares of Facebook closed at $78.40 yesterday.



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