Facebook Analyst Roundup: Before and After
The road began when CEO Mark Zuckerberg took the stage at TechChrunch Disrupt for his first public appearance since the IPO. Shares gained as much as 5 percent as he spurred confidence in some investors.
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However, RW Baird’s Colin Sebastian was quick to point out that “long-term opportunities should ultimately trump near-term revenue and expense headwinds.”
Ken Sena at Evercore Partners cut his price target to $23 from $34 after the appearance. He pointed at concerns over user engagement and decline in time spent using the service.
Needham & Co.’s Laura Martin reiterated a “Buy” but cut her target to $25 from $40, citing among others concerns, mobile.
Toward the end of September, Barron’s published a story about Facebook that suggested shares were worth “Perhaps only $15,” leading the way in a 9 percent drop. The article noted that “success in mobile is no sure thing,” and many agreed.
Stifel Nicolaus managing director Jordan Rohan weighed in after the story by reiterating a “Hold” on the stock, pointing out that the transition to a profitable mobile strategy will be bumpy.
Shortly after, Goldman Sachs lowered its price target on the stock from $42 to $37 — still pretty bullish — and maintained a “Buy” rating. To the bank’s credit, the note stated: “With the next lockup ending soon, coupled with the market’s allergy to supply, we would expect the shares to remain volatile over the next few months. That said, we believe the significantly higher CPMs associated with its new advertising initiatives will help drive uplift in its overall CPMs over time.”
Perhaps most prophetically, Wedge Partners analyst Martin Pyykkonen said just about a week ago, “We know mobile advertising is still early, but we also think mobile advertising is near a positive inflection.”
And then, the earnings came.
Jordan Rohan at Stifel Nicolaus told CNBC that he was surprised by Facebook’s huge turn around, particularly in mobile advertising. That bumpy road has turned out all right, so far.
Weighing in after the earnings, Bank of America, Citigroup, and Stifel Nicolaus all raised their ratings from “Neutral” or “Hold” to “Buy.”
Citi analyst Mark Mahaney said that for the first time, investors are seeing a reasonably priced stock along with accelerating growth for the company.
Revenue was up 32 percent from the quarter a year ago. Advertising represented 86 percent of that revenue, with mobile ad revenue accounting for 14 percent of that.
Analyst re-evaluations are sure to continue in the future as the landscape changes, but it’s still interesting to see how much an earnings release can surprise everybody.