Facebook Inc (FB) PT Cut By Deutsche Bank, Despite Solid Results

Facebook Inc (NASDAQ:FB) reported revenue and operating income 1% and 5% above analysts estimate, with ad revenue (including mobile) in-line. According to a recent research report by Deutsche Bank,  the 41% ad growth was below the heightened expectations into the quarter, but demonstrates progress for Facebook Inc (NASDAQ:FB) in newsfeed. The operating expense ramp up reduces analysts EBITDA in 2013 by 16%, but oddly the research firm view it as taking one of the uncertainties out of the picture for 2013.

Facebook Inc (FB) PT Cut By Deutsche Bank, Despite Solid Results


Mobile revenue doubled Q/Q to $306m, and while below expectations, analysts from the research firm continue to see a huge opportunity for newsfeed to ramp significantly from current levels in 2013. Overall ad revenue increased 43% Y/Y ex-FX, accelerating for the second consecutive quarter. Finally, EBITDA margins of 62% were up sequentially and only down 110bps Y/Y (vs. down 470bps Y/Y in 3Q12), which were partially aided by the payment revenue catch up.


Right rail likely declined around 10% Y/Y, as desktop traffic declines and advertisers shifting budgets to news feed are more than offsetting the improved yields from new products (FBX and Custom Audiences). Facebook Inc (NASDAQ:FB) guided to 50% Y/Y opex growth ex-SBC, ahead of analysts previous estimates, driving an 800bps EBITDA margin decline in 2013. Finally, Facebook Inc (NASDAQ:FB) did not provide the same level of disclosure around ad revenue trajectory as it had in the previous two quarters.

Deutsche Bank have reduced its 2013 revenue and EBITDA by 7% and 16% respectively. Firm’s $37 PT (previously $40) is based on a 20x 2014 EV/EBITDA. Key risks include mobile monetization, lower user engagement and revenue deceleration.

Facebook Inc (NASDAQ:FB) decreased 4.58%  in the pre-market trading hours to $29.81.

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