Shares of Facebook (FB) are sliding after the company's third-quarter results beat consensus estimates, but its CFO David Wehner warned of decelerating ad revenue and increased spending in 2017. However, Wall Street analysts remain bullish on Facebook, with very many saying this morning that the weakness in the social media giant's shares creates a buying opportunity.
STRONG RESULTS: In a post-earnings research note to investors, RBC Capital analyst Mark Mahaney noted that Facebook reported "very strong results," adding that its fundamentals continue to be the strongest in the Internet sector. Further, the analyst believes the company's warnings about ad revenue growth decelerating sharply next year and "aggressive" investments in 2017 are "very consistent" with its previous statements. Mahaney pointed out that the company continues to have several new, large growth drivers, and that he expects it to continue to deliver strong growth for some time. He reiterated an Outperform rating and $170 price target on the shares. His peer at Citi also noted that the social media giant delivered "strong" growth in the third quarter and said he believes the soft guidance is already reflected in forecasts and expectations. Analyst Mark May reiterated a Buy rating on the stock and raised his price target on the shares to $162 from $158.
BUY ON WEAKNESS: This morning, several analysts recommended buying Facebook's shares on weakness following quarterly results. Needham analyst Laura Martin was one of the many voicings this opinion, saying she believes the company's growth will continue to outpace peers and over deliver estimates given its continuing pivot toward "video first" coupled with its dominant mobile strategic position for advertisers. Moreover, Martin believes demand for Facebook's ad units will drive pricing up faster than ad unit growth slows. JPMorgan analyst Doug Anmuth also believes Facebook's third quarter report showed engagement remains strong. Further, the analyst told investors in a note of his own that he thinks the company is being conservative with its commentary on 2017 ad revenue growth. The analyst reiterated an Overweight rating on the shares and recommended buying amid the post-earnings pullback in the stock. While Oppenheimer analyst Jason Helfstein lowered his price target for Facebook to $144 from $150 on a slightly more conservative outlook for 2017, he expects the company's revenue per hour to continue to grow, as advertisers face scarcity of inventory and learn to customize video ads for social platforms. Helfstein kept an Outperform rating on the shares.
PRICE ACTION: In morning trading, shares of Facebook have dropped about 4.5% to $121.46.
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