Ad Revenue Beat from Facebook (FB) But EPS Upside came from Taxes - Susquehanna

Shyam Patil from Susquehanna published an earnings recap this morning highlighting Facebook's (NASDAQ: FB) upside in the quarter while recognizing the EPS upside came from a lower tax rate. That said, more revenue beating quarters are likely to come as mobile, Instagram and Video continues ramping.

Revenue of $4.50B beat consensus by ~3% (~$127m) with ad revenue driving the upside. Opex was 7% higher than expectations, causing non-GAAP EBITDA to come in ~1% lower than the Street. Lower taxes, however, allowed EPS to beat consensus by 9%.

Management cited three key reasons for the strength in Mobile Advertising : (1) strong advertiser demand, (2) strong user growth and engagement, and (3) increasing ad load. Perhaps more importantly, FB sees continued room for these three levers to drive growth, including ad load.

FB more than doubled its daily views from 1Q to 8b (paid and UGC)…and businesses of all sizes are participating as over 1.5m SMBs now post videos (organic and paid) vs. 1m last quarter.

One large agency noted that video is expected to represent ~40% of its FB ad spend in 4Q vs. 15-20% in 1H15. LiveRail continues to differentiate based on its targeting…and can now deliver over 90% accuracy in segment age and gender across desktop, mobile web and apps… significantly higher than the 31-55% range when not using LiveRail.

The analyst raised his 4Q15 revenue estimate by 2% and EBITDA by 3%. He maintained his Positive rating and increased his price target to $130 from $125.

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 $103.94 yesterday.

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