JPMorgan Says Facebook Fears Overdone As Cowen Touts Video Ads
Commenting on his best ideas for 2017, JPMorgan analyst Doug Anmuth reiterated Facebook (FB) as his top large-cap pick in the Internet space, citing a compelling valuation and saying fears are "largely overdone." Meanwhile, his peer at Cowen raised his price target on Facebook saying the firm's 2017 proprietary ad survey demonstrated the company's social leadership and rising video capabilities.
TOP LARGE-CAP PICK: In a research note this morning, JPMorgan's Anmuth told investors that Facebook remains his top large-cap Internet pick, noting that the company saw healthy earnings beats, ad revenue growth, margin expansion, and "significant" upward earnings revisions. However, the analyst noted that enthusiasm toward the name remains somewhat muted despite Facebook's shares rallying about 9% year to date and trading only 6% below its all-time high. A number of concerns have contributed to the recent "wall of worry," including potential for meaningful revenue deceleration, slowing ad load growth, and recent headlines around fake news and ad metrics, he argued, adding that he believes these fears are "largely overdone" and continue to create a "good buying opportunity." Further, the analyst told investors that he sees the valuation of Facebook shares as compelling, and reiterated an Outperform rating and $165 price target on the shares. Additionally, Anmuth said he also likes Netflix (NFLX) and Alphabet (GOOG; GOOGL) among large-caps and Yelp (YELP) and Match Group (MTCH) among small- and mid-caps in the internet sector.
SOCIAL LEADERSHIP: In a research note of his own, Cowen analyst John Blackledge raised his price target for Facebook to $156 from $150 and told investors that his firm's 2017 proprietary ad survey demonstrated Facebook's social leadership and rising video capabilities. The analyst pointed out that respondents said again this year that targeting is the most important attribute toward shaping budget decisions and, in his view, Facebook has "the best user targeting in the market." Additionally, the survey showed that 17% of ad buyers would use Facebook Video for a standalone brand campaign, up from 10% the prior year, he noted. Moreover, Blackledge pointed out that the survey work has demonstrated that the social media giant has high functional capabilities across analytics, ad formats, and consistently demonstrates a high ROI, while establishing a "strong" mobile capability. Additionally, he expects other ad formats and products to be introduced longer term. Blackledge also raised his price target for Alphabet to $1,050 from $1,000 as the ad survey showed digital acceleration continues, while his colleague Tom Champion raised his price target for Criteo (CRTO) to $55 from $53.
OCULUS TRIAL: In a trial that began Monday, Facebook is accused of completing its acquisition of Oculus in 2014 with "full awareness" that the Rift VR device was built with stolen technology and promoted with a false origin story, according to Bloomberg. In the $2B dispute, ZeniMax Media is alleging that Oculus stole its intellectual property, the publication said, adding that the trial may see Facebook CEO Mark Zuckerberg get called to the witness stand.
PRICE ACTION: In morning trading, shares of Facebook are fractionally down to $124.68.
Disclosure: None.
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