New York, October 26 (FinanceEnquiry.com) – Analyst Ross Sandler at Deutsche Bank Securities reiterates HOLD rating on the shares of Facebook, Inc (NASDAQ: FB). The 12-month target price has been raised from $22 to $24.
In a research note published on October 24, the analyst mentions that coming above the consensus, Facebook posted revenue of 3 percent. Moreover, on the back of Sponsored Stories in Newsfeed, which was roughly $200 million in third quarter of 2012 (up from $30 million expected in second quarter of 2012) and with $150 million coming from mobile ads, revenue of advertisement is re-accelerating. Moreover, although payments revenue is lowered, estimates of 2013 have mainly been maintained on higher ads even though being excited on the subject of the ad acceleration.
In addition to this, Y/Y advertising growth acceleration of the company to 43 percent Y/Y exclusive of foreign exchange (FX), up from 36 percent excluding of foreign exchange (FX) last quarter, was the major positive in third quarter of this year. With management of Facebook emphasizing the long term prospect for monetization of mobile, the attitude of the call was constructive.
Besides, letting EBITDA margin to augment 30 basis points Q/Q, growth of cash expense was only 67 percent Y/Y in third quarter, under the run rate of second quarter. By 3 percent and 4 percent, revenue of 2014 and EBITDA have been augmented, respectively. On a mixed average of 35x P/E, 15x EV/EBITDA and a target FCF yield of 3 percent on estimates of 2013 and 2104, target price of $24 is based. Monetization of mobile and deceleration of revenue have been comprised in the key risks. Furthermore, estimated historical P/E analysis for the years 2012 and 2013 are 36.8 x and 30.2 x, respectively, the analyst adds further.
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