Facebook (FB) PT Lifted to $115 at Needham & Company
Needham & Company analyst Laura Martin reiterated a Buy rating and boosted her price target on Facebook (NASDAQ: FB) to $115.00 (from $93.00) following strong Q2 results and an improved outlook.
Martin commented, "We raise our target price to $115, owing to FB’s strong 2Q15 results and improved outlook. FB’s reported 2Q15 revenue was $4 billion, up 39% y/y (up 50% ex-FX). Ad revenue grew 43% y/y (up 55% ex-FX). FCF hit $1.3B. North American ad revenue grew 55%, APAC grew 48%, Europe grew 30% y/y and Rest of World grew 22%, slowed by FX. The best things about FB’s 2Q15 (our view) were, in order: 1) Instagram monetization; 2) Video; 3) closing the circuit between ads and purchases; 4) 40mm small businesses. We retain our Buy rating as we believe FB has solved the biggest challenges for online marketers: 1) mobile reach; 2) cross platform measurement; 3) fraud prevention; 4) video; and 5) extreme targeting. We raise our target price to $115 (from $93)."
Key metrics for the quarter, according to the analyst:
- Reach: 1.49 billion people use Facebook monthly and 968mm (up 17% y/y) people globally use Facebook every day, about 65% of FB’s MAUs. Time spent across Facebook, Messenger and Instagram is now 46 minutes per day on average, excluding WhatsApp.
- Mobile ad revenue grew 74% y/y to $2.9B, reaching 76% of FB’s total ad revenue. In June 2015, 1.31B people accessed Facebook on mobile devices, up 23% y/y. FB represents 1 out of every 5 minutes spent on smartphones in the US.
- Video revenue was a meaningful growth driver in 2Q15, despite its short tenure. Facebook enables mass reach and cross-device targeting and measurement abilities better than competitors.
- Instagram (300mm MAUs) revenue is ramping along with the size and engagement of its users. In Q2, FB launched Instagram ads in Brazil, Germany, and Japan and launched new ad units for marketers including carousel ads on Instagram. Instagram is increasingly focused on getting a real-time snapshot of the world.
- Messenger (700mm MAUs) rolled out new features including mobile video calling, a new way to share locations, and the option to sign up for messenger without using a Facebook account.
- Guidance: For FY15, FB cautioned that y/y revenue growth would continue to slow owing to the law of large numbers, and FB projected 19% declines in payments/other for 2H15. Offsetting this news, FB: 1) narrowed its expense guidance to the low end of its prior range (now up 55% to 60% from up 55-65% y/y); and 2) lowered CapX estimates to $2.5B to $3.0B (down from $2.7B to $3.2B)..
- What’s Down? In Q2, FB’s average price per ad grew 220% y/y but total ad impressions fell 55% y/y. Pricing fell owing to the redesign of FB’s right-hand column ads and the shift towards mobile (where FB has no right-hand column ads). Desktop revenue fell 8% in 2Q15, after falling 4% in 1Q15.
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 $96.99 yesterday.