Raymond James recently hosted a meeting with three leading Facebook Inc (NASDAQ:FB) PMDs (Preferred Marketing Developers) who expected third quarter to be flat, but were positive on Facebook’s advertising demand on the back of rising mobile outlook and positioning, increasing adoption by direct response advertisers, increasing traction with CPG (Consumer Packaged Goods)/Auto advertisers, as well as rising ad adoption in international markets.
On the basis on these growth drivers, Raymond James analyst Aaron Kessler has maintained a StrongBuy rating on Facebook Inc (NASDAQ:FB).
Baupost's investment process involves "never-ending" gleaning of facts to help support investment ideas Seth Klarman writes in his end-of-year letter to investors. In the letter, a copy of which ValueWalk has been able to review, the value investor describes the Baupost Group's process to identify ideas and answer the most critical questions about its potential Read More
Facebook’s ad revenues
For the current quarter, ad spending trend for Facebook Inc (NASDAQ:FB) has been stable and is in line with the expectations. The analysts expect advertising revenues of $1.63 billion fuelled by 12 percent quarter over quarter mobile growth, compensating the 5 percent quarter over quarter desktop decline. Pricing is also expected to be stable on a sequential basis quarter to date. Preferred marketing developers are expecting strong momentum for mobile fuelled by high click through rates, mobile app installs along with performance in the previous year.
PMDs hold that surge in the direct response advertising on Facebook Inc (NASDAQ:FB) will help the company to gain a strong position in the fourth quarter. PMDs also expect increased grip on Auto and Consumer Packaged Goods advertisers as they are noticing offline results from Facebook.
PMDs positive on video advertising with Instagram
Preferred marketing developers said that performance and result of video advertising will be impressive along with results of Instagram, although they did not specify the time frame. CPM (Cost per 1000 Impressions) for video could be in the range of $20-$40 compared to mid-single digit CPMs for News Feed ads today. Advertisers will be successfully alluring the younger generation on Instagram, which had a user base of 130 million, at the end of the second quarter.
Europe and Asia- a potential opportunity
Southeast Asia and the Middle East will be strong points of growth owing to increasing advertising interest; also growth of smartphones in the developing countries will be a key growth driver. PMDs also noted that Facebook is expanding globally at a brisk pace. Analyst believe there is plenty of potential for Facebook Inc (NASDAQ:FB) to grow further as the Europe advertising revenue per user is only half the rate of the United States whereas Asia is only about one fourth of the monetization rate.
Ratings from other analysts
Analysts at UBS AG have increased their price target on Facebook Inc (NASDAQ:FB) from $36.00 to $45.00 in a research note issued on August 9, and assigned a Buy’rating. JP Morgan analysts have given an ‘Overweight’ rating on the company and have raised the price target from $38.00 to $45.00, in a note issued on August 7.