For Facebook Inc (NASDAQ:FB)’s, third quarter performance, Deutsche Bank analysts (Ross Sandler, Lloyd Walmsley, Deepak Mathivanan and KevinLaBuz) are expecting a slight upside to the consensus revenue and EPS estimates of $1.9 billion and $0.18, and are bullish on its trajectory, despite “the heightened expectations.”
Messaging to marketers paying off for Facebook
Facebook’s messaging to marketers has started paying off fueled by three approaches; custom audiences, FBX and, mobile app installs, which in turn is backing the ROI compared to other segments.
Analysts noted that the second quarter 2013 mobile revenue was generated by only 6 percent of impressions and getting support of the 1-ad-per-20-NF story along with 51 percent mobile MAU growth, so Facebook Inc (NASDAQ:FB) has potential upside in the quarters ahead.
According to analysts, buy side expectation in the third quarter can be achieved if PMD checks are indicative. Analysts believe that their $1.65 billion ad revenue is a “conservative” estimate as desktop “starts to hit easier” year on year comps and new ad targeting features are coming in even after sales force alignment in the third quarter.
3Q estimates
Deutsche Bank analysts expect EBITDA to come in at $1.057 billion, or a margin of 56.6 percent, which is in line with the second quarter 2013 levels. Revenue is forecasted to be on the higher side to enhance margins despite “aggressive headcount and huge infrastructure investment.” The analysts are also taking a close look at the monthly average user growth rates because it is the best metric to give an idea about the revenue “once FB’s sell-through and pricing catch-up are fully baked in”.
Facebook Inc (NASDAQ:FB) has been assigned a price target of $62 with a Buy rating. Downside risks to valuation could be missing heightened expectations, competition, potential decelerating metrics, margin and multiple compressions.
More specific details will act as catalyst
Analysts at Susquehanna Financial Group, in an earlier report, said they are stunned by the Facebook Inc (NASDAQ:FB) ad performance and further checks indicate that Facebook gained more traction during the third quarter. Key catalysts in company’s growth are direct response dollars, Custom Audiences and app installations. Analysts have increased the price target from $28 per share to $50 per share, but are Neutral until Facebook provides more specific details on the launch of new products, including video ads and Instagram ads.
