Facebook (FB) at 'Center of Mobile Ad Revolution', Goldman Reiterates Buy

May 2, 2013 8:50 AM EDT
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Price: $127.04 -0.4%

Rating Summary:
    49 Buy, 8 Hold, 1 Sell

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Following Facebook (NASDAQ: FB) Q1 results yesterday, Goldman Sachs reiterated a Buy rating on the stock with a price target of $40.00. Facebook revenue topped Street estimates at $1.46 billion vs $1.44 billion, while EPS missed by at penny at 12 cents. In Goldman Sachs analyst Heather Bellini's view, the big surprise was mobile ad revenue.

"Mobile was around 30% ($374mn) of total ad revenue in 1Q13, up 22% qoq from the $306mn reported in 4Q12. Given the absolute mobile number came in above the Street while total ad revenues were in line, this would imply desktop revenue (including desktop news feed) was flat yoy versus our forecast of down 1%. While impression growth of 39% yoy came in slightly below our forecast of 43% we note that worldwide CPMs grew 3% yoy compared to our forecast of flat," said Bellini.

Goldman's conclusion is that Facebook will continue to be the center of the mobile ad revolution.

"While we still expect engagement growth to remain at low levels given its 1bn+ users, we see significant opportunity for FB to drive higher pricing on its ad units as brand and direct marketers alike take advantage of its broad reach and precise targeting. Our field conversations suggest the momentum around FBX, custom audiences, upcoming video ads, etc. is just getting started," added the analyst.

For an analyst ratings summary and ratings history on Facebook (NASDAQ: FB) click here. For more ratings news on Facebook click here.

Shares of Facebook closed at $27.43 yesterday.

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