Facebook, Inc. (NASDAQ:FB) reported highly anticipated Q3 earnings yesterday and while the results were mixed – overall though, it seems analysts were disappointed and the stock is down about 4 percent to about $127 at the time of this writing (and was down eight percent after hours yesterday). So why the drop? Is valuation too high and/or were the results just not that great? Analysts have a slew of reports out this morning on the topic and provide their thinking below (spoiler: analysts do not blame high valuation). Below is a short summary of the reactions.
FB Earnings – Sell side reacts
Michael Graham, CFA Canaccord Genuity
Facebook reported solid Q3 results, with ad revenue growing ~59% y/y, from 63% in Q2. Management guided to further deceleration in Q4 given a tough Q4/15 comp when ad rev growth accelerated 900 bps. However, 2016 expense growth guidance was lowered again by 500 bps for non-GAAP and pointed to the lower-end for GAAP expenses. 2017 revenue expectations were tempered with reiteration of slower ad load growth next year. That said, there are several consumer and ad innovations that should keep advertiser demand high. We believe Facebook’s operating momentum, high growth, and reasonable valuation continue to suggest it should be a core tech holding.
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