Facebook (FB) Results Neutral Overall, Negative vs Expectations - BMO Capital

BMO Capital analyst Daniel Salmon reiterated a Market Perform rating and $72 price target on Facebook (NASDAQ: FB) following Q3 results calling them neutral overall, but negative versus expectations.

Salmon comments, "A similar story to TWTR: inline 3Q results and 4Q revenue guidance weren’t enough to meet expectations. Compounding this is higher-then-expected 2015 cost growth at FB. We have consistently maintained that FB (and GOOG) should see declining margins over the long-term, and while we didn’t expect spending to ramp quite this quickly next year, it also wasn’t a great surprise. With 178mm shares issued to WhatsApp coming available for sale in 4Q14 and 1Q15, we expect FB to remain range-bound for the next few quarters. Beyond that, Facebook’s growth opportunities are significant, but judging the pace of monetization becomes more important in light of increased spending. We do not expect ad tech (Atlas, FAN, LiveRail) to be a material driver of near-term earnings, nor do we expect video ads to truly take off until the content strategy comes into form (the recent partnership with Lions Gate suggests this is underway) and we don’t expect an ads API for Instagram. We felt the message from FB was clear: we will take our time. And we believe that time is deserved in light of the shift to a “portfolio” strategy from a “platform” one over the past 24+ months."

The firm trimmed 2015 non-GAAP EPS to $1.63 from $1.99.

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 $80.77 yesterday.

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