Deutsche Bank Positive on Core Facebook (FB) App, Raises PT to 'Street High' $270

Deutsche Bank analyst Lloyd Walmsley raised the price target on Facebook (NASDAQ: FB) to $270.00 (from $260.00) while maintaining a Buy rating. The $270 price target matches a 'Street High'. The stock is the firm's top large-cap pick for 2020 in the sector.

The analyst is positive on the core Facebook app and said the resurgence is durable into 2020.

"We are bullish on Facebook and see the renewed strength in the core Facebook app becoming a critical leg of the story around FB shares in 2020," Walmsleu commented. "This was not a coincidence, but the result of extensive product work - reworking the core newsfeed algorithm promoting meaningful content, rolling out Stories, scaling Marketplace (800M MAUs), building its Groups product, adding more video content and continuing to improve relevancy algorithms across content and ads. Not only has Facebook used its massive audience in its core product to scale new surfaces and experiences, but the company has managed several large transitions - the original rollout of news feed in 2006, the shift to mobile during the IPO in 2012, and more recently the shift to the Stories format."

Overall, Walmsley said they are increasingly comfortable with the strength in core Facebook - app engagement, ad impression growth and monetization - and think it can continue over the medium term.

The firm raised GAAP PE and EBITDA multiple 1 turn to 25x PE (from 24x) and 15x EBITDA (from 14x), which boosted the price target to $270 from $260.

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