Deutsche Bank Comments on Facebook 'Growth Deceleration' (FB); Analyst Raises PT to $85

Deutsche Bank maintained a Buy rating on Facebook (NASDAQ: FB) and raised its price target to $85.00 (from $76.00). Analyst Ross Sandler described Q1 as solid, especially in the US and on mobile, but he expressed some caution about "growth deceleration."

"Facebook reported ad revenue of $2.27B, or $130m above consensus, and importantly, EBITDA exceeded by 34%. The company continues to execute extremely well across the board. The muted reaction to results isn’t that surprising given the bullish sentiment heading into the quarter coupled with: 1) the CFO departure, 2) the mathematical deceleration coming in future quarters, and 3) the overall climate around internet stocks. We are raising our estimates and continue to view the risk/reward as compelling heading into F8 next week," said Sandler.

"Positives In 1Q14 1Q was solid across the board and management’s tone continues to be upbeat. Ad revenue remains the standout increasing 83% y/y ex-FX to $2.27B, 6-point acceleration. North America drove the largest upside in the quarter, with ad revenues growing +88% y/y (13% above consensus). Engagement (DAU/MAU) continues to improve across all geographies with the blended average of 63% up from 60% during 1Q13. App install volume of 105M in 1Q (vs. 100M in 4Q) implies healthy growth in other areas of mobile revenue and strong diversification. Operating margin of 55% (up from 39% in 1Q13) continues to meaningfully exceed consensus," he continued.

"There were a few negatives to point to in 1Q. CFO David Ebersman is stepping down. RoW ad revenue of $262M missed consensus $282m, likely a result of FX. Facebook performance has been nothing short of remarkable for the past year, but is heading into a stage of meaningful growth deceleration and limited upside to consensus, so while the multiple compression to date reflects this, it could degrade further," he 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 $61.36 yesterday.

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