'2.7 billion people can't be wrong:' Here's what Wall Street is saying about Facebook earnings

JP Morgan — 'Facebook is in rarefied air across the combination of scale, growth, and profitability'

Rating: Overweight

Price target: $210 (from $195)

"Facebook is in rarefied air across the combination of scale, growth, and profitability, as the company’s massive reach and engagement continue to drive network effects, and its targeting abilities provide significant value to advertisers," said Doug Anmuth.

"We believe it is still early in the development of Facebook’s ad platform, including an ongoing improvement in ad targetability and measurement as well as a shift toward ads with higher quality formats, which we believe will become increasingly valuable to advertisers."

Morgan Stanley — 'This story is starting to get good'

Rating:

Price target: $190 (from $175)

"We see the monetization roll-out of Instagram adding ~$16bn of incremental ad revenue in 2019," said analyst Brian Nowak. "We are also positive on FB's ability to continue to innovate and improve its monetization (Canvas Ads, Dynamic Ads, video). Combined with high and growing engagement we see monetization upside going forward."

RBC Capital Markets — '2.7 billion people can't be wrong'

Rating: Outperform

Price target: $200 (from $190)

"At the margin, we are incrementally positive," analyst Mark Mahaney wrote. "We feel we could be in a period of sustained re- rating as the worst FB fears appear not to have been realized. We feel the current Revenue growth deceleration is modest (35% Y/Y growth in Q3 to 33% in Q4...very modest), and believe DAU’s increasing in the U.S. for the first time in 3 qtrs is a positive sign."

Jefferies —'Don't call it a comeback, FB has been here for years'

Rating: Buy

Price target: $200 (from $180)

"FB delivered a larger-than-expected Q4 beat & maintain for '19 in the face of stiff controversy with 9% y/y user growth & 19% ARPU growth," analyst Brent Thill wrote. "Our framework continues to look for $10+ in EPS in '21 and should not trade below 18-21x. We were impressed with growth across all geos in DAUs & ARPU. Looking at '20, expense growth will likely mirror rev growth as the focus shifts to driving the core products forward."

SunTrust Robinson Humphrey — 'A utility for users and advertisers'

Rating: Buy

Price target: $210 (from $200)

"While regulatory/macro concerns remain, and mgt guided to further revenue decel/margin contraction in FY19, we find FB compelling given 1) attractive valuation on Street estimates that seem achievable, 2) negative publicity around data privacy and regulation do not seem to detract advertisers/users from the platform; 3) monetization improvement in 2019/2020 as engagement builds on IG Stories/pricing improves, and 4) optionality on WA/Messenger," analyst Youssef Squali said.

Macquarie Research — '26% of all humans on planet earth use a FB property every day'

Rating: Outperform

Price target: $195 (from $190)

"The users are still there: 2.7b MAU and 2b DAU," said Benjamin Schachter.

"In other words, 26% of all humans on planet earth use a FB property every day. Despite the horrific headlines over the past year, users are sticking with FB. This tells us that a significant percentage of humans find value in FB. As we have been saying since our original FB launch, as long as the users are there, FB can find ways to monetize. As long as FB continues to provide utility for users, we think it will continue to attract advertising dollars."

Pivotal — 'Longer-term concerns remain'

Rating: Sell

Price target: $120 (from $113)

"Good 4Q18, but longer-term concerns remain," said Brian Wieser.

"Advertising seems like the least of the company’s worries at this time (at least for now: conversations we have with marketers convey to us scrutiny of the platform is increasing, and the “limits to growth” argument we have made is still a significant negative issue most investors don’t fully account for). Costs for platform safety seem almost certain to cause ongoing margin erosion (probably more than the company anticipates beyond 2019) and capturing advertiser budgets that would otherwise go to premium video platforms will require substantially greater investments in premium content on Facebook’s part."

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