Facebook Inc (FB) Price Target Raised To $90 By UBS

UBS Global Research analysts Eric J. Sheridan, Vishal J. Patel and Timothy E. Chiodo rate Facebook Inc (NASDAQ:FB) as a Buy as they run the company through a series of Q1 checks.

Facebook Inc (FB) Price Target Raised To $90 By UBS

Q1 checks reflect continuing pricing strength

Our Q1 advertiser channel checks suggest that the pricing strength exhibited in Q4 (+92% YoY price-per-ad) has carried over into early 2014 and is likely sustainable for longer than our prior estimates had assumed. In particular, we note the improved quality of advertisers & increased frequency of higher CPM formats (mobile app ads in particular) within the existing ad load. We also point to an Ogilvy study highlighting declines in organic page reach (from ~12% in Oct to ~6% in Feb), which we believe is acting as an impetus for greater ad spend as brand advertisers seek to maintain their audience – outsized ROIs on FB are more than sufficient to justify this greater spend.

Dan Loeb’s Third Point Re To Merge After Years Of Losses

Nestle Dan Loeb Daniel Loeb third point capital hedge fund manager activist investor poison pen activism Yahoo corporate governance famous investorsLast week, Third Point Re insurance, which is backed by US hedge-fund manager Daniel Loeb, said it would merge with Sirius International Insurance Group in a cash-and-stock deal worth around $788 million. The deal comes at a pivotal time for both companies. Third Point Re To Merge After Years Of Losses Early last year, reports Read More


Recent advertising deals show traction with brands

Facebook Inc (NASDAQ:FB) is gaining increased traction with brands, who view the platform as a means to buy audience/reach (based on our conversations). In particular, we highlight the global partnership announced by Mondelez International – the agreement covers 52 countries & includes a joint commitment to innovation, opportunities to opt into Facebook’s beta-testing programs, access to research and capability building through immersion days in priority markets. Separately, AdAge reports that Omnicom has signed a $100mm deal to roll out paid advertising on Instagram on behalf of its brand clients. That said, we believe our estimates are achievable without a meaningful contribution from Instagram or auto-play video ads.

Increased operating estimates partially offset by dilution

Our new FY14 ests are revs $11.9b (from $11.1b); Adj. EBITDA $7.4b (from $6.8b), Adj. EPS $1.25 (from $1.27). Our new FY15 ests are now revs $16.0b (from $14.0b); Adj. EBITDA $10.2b (from $8.6b), Adj. EPS $1.80 (from $1.67).

Facebook’s valuation

Our $90 price target (prior: $72) for Facebook Inc (NASDAQ:FB) is based on our weighted avg. framework (EV/Sales, EV/EBITDA, EV/FCF) based on our ’13-’15 ests. Our ests do not reflect revenue & EBITDA from WhatsApp (as the deal has not closed) but account for the expected share count dilution – an approach we consider conservative.