Facebook (FB) is Like Google Circa 2007, RBC Capital's Mahaney Says
RBC Capital analyst Mark Mahaney maintained an Outperform rating and $105 price target on Facebook (NASDAQ: FB) following solid Q2 results. The analyst notes very high and very profitable growth, saying this only happened once before in Internet history - GOOG in 2007.
He commented, "... And just like GOOG in 2007, we see in FB plenty of strong, secular, platform growth ahead. In part because FB mgmt is correctly prioritizing the user experience while developing better solutions for advertisers. (Just like GOOG.) And in part because FB is effectively investing against several material near/medium/long-term Greenfield Opportunities that we detailed in our last ULT report – Video Ads, Instagram Monetization, Messaging Platforms, and Virtual Reality. (Just like GOOG did/does.) Investors who stayed the course with GOOG since 2007 – with adjustments along the way – have enjoyed a 150%ish return. We believe a similar l-t outcome is possible for FB investors today."
Keys to the quarter, according to Mahaney: – 1. More Mobile Friends – MAUs up 13% Y/Y to 1.49B, a bit better than expected, 44% of which are Mobile-only; 2. More Friendliness – DAU/MAU ratio (engagement measure) held flat Q/Q at a record-high 65% in a seasonally tough quarter; 3. Rising Monetization – ARPU +23% Y/Y to $2.76, and that’s still likely only a fraction of Google; 4. Intrinsically Impressive Ad Revenue Growth – 55% Y/Y growth (ex-FX) on a $3.8B base, same growth as in Q1, tho on an easier comp; 5. Intrinsically Impressive Operating Margin – 55%, and better than expected; & 6. Positive Dpoints on Video & Instagram – Mngmt highlighting strong demand for Mobile Video ads and seeing no difference in user willingness to engage with Ads on Instagram vs. Facebook.
The firm's 2015E Rev decreased 3% to $17.1B, with EPS reduced 2% to $2.06
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.