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Wall Street is breathing a sigh of relief after
Facebook
’s
(FB) earnings.
On Tuesday, Facebook posted third-quarter earnings per share of $1.76 on revenue of $13.73 billion, versus consensus estimates for EPS of $1.46 on revenue of $13.765 billion, according to FactSet. But even more important than the numbers, analysts pointed to the company’s conference-call comments that reduced investor uncertainty about Facebook’s future.
Bank of America Merrill Lynch analyst Justin Post reiterated his buy rating for Facebook stock, citing the more optimistic remarks from the company’s executives.
“On the last call we felt like FB management left the Street with little visibility on usage trends and a message of open-ended revenue deceleration and potentially several years of margin declines,” Post wrote on Wednesday. “On this call, management indicated usage is stable in developed markets.”
The analyst reaffirmed his $190 price target for the stock.
After whipsawing in after hours last evening, Facebook started out Wednesday with a 5.4% rise to $154.10.
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Going into Facebook’s earnings report, investor sentiment on the company has soured since its Cambridge Analytica data scandal earlier this year. In July, Facebook’s stock price dropped significantly after it projected reduced long-term profitability due to increased security and content-review expenses.
Facebook stock was down 17% this year through Tuesday’s close versus the roughly flat S&P 500 return.
Deutsche Bank analyst Lloyd Walmsley believes Facebook will be able to extract more profits from its Stories and Messenger offerings.
“We would be buyers of FB shares following 3Q results and see Street estimates appropriately reset, allowing the narrative to shift towards stabilization at core FB, potential re-acceleration from Stories usage and monetization, early ramping in messenger monetization,” Walmsley wrote on Tuesday.
Stories are brief user-generated content – including photos or videos – that are posted on Facebook, but only available to be viewed temporarily. Snap’s (SNAP) Snapchat pioneered this type of social media content.
Walmsley reiterated his buy rating and inched up his price target to $195 from $192 for the company’s shares.
In similar fashion, KeyBanc Capital Markets analyst Andy Hargreaves thinks Facebook’s new features will drive future profits.
“We recommend buying FB. Concern about spending appears priced in,” he wrote on Tuesday. “In addition to the Feed, we see substantial room for growth in Stories, video, and messaging, which should help drive growth and improve sentiment.”
Hargreaves reiterated his Overweight rating for Facebook’s stock and has a $195 price target on the stock.
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