Deutsche Bank Sees Heightened Risk to Facebook's (FB) Street Estimates for the Rest of 2018 and 2019

Deutsche Bank analyt Lloyd Walmsley weighed in on Facebook (NASDAQ: FB) after attended the AdWeek Day 1 and additionally hosting a set of investor meetings with industry executives at a social marketing technology company with significant ad volumes in social, and a strategic advisory firm in the ad space.

Walmsley said they came out of Day 1 seeing "heightened risk to Street estimates for Facebook in 3Q, 4Q and 2019, given mixed channel feedback."

He adds, "While some of our conversations in the ad community remain positive, we are starting to hear more cautious feedback and the company seems on the defensive, particularly post last week's data breach disclosure and the recent press around shadow advertisers. Despite starting to hear mixed feedback for the first time since the shift to mobile, we think a lot of this is already priced into shares, trading at 17.4x on our GAAP P/E estimates on 2020 (and 15.8x ex-cash). In addition, we expect to get more color from the ad industry on trends over the course of this week and otherwise. While Facebook shares may struggle to work near term, amidst uncertain fundamentals and negative headlines, we see the potential for Stories to reinvigorate engagement and deepen the company's long-term competitive moats. As advertiser density in Stories ramps, creative improves for the medium term, and the company starts to ramp inventory in Messenger and WhatsApp, we see potential for ad revenue to eventually re-accelerate longer term and maintain our positive long-term view on Facebook."

The firm maintained a Buy rating and price target of $205.00

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 $161.07 yesterday.

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