Watch Out for Facebook Stock in 2017
Facebook Inc (NASDAQ:FB) stock has become interesting again, as the company’s prospects for 2017 look better. FB stock gained 2.3% last Friday and closed at $123.41. The strength in tech stocks also sent the NASDAQ composite touching its all-time high.
Facebook stock was hammered in 2016 after the company’s third-quarter results, but it looks all set to make a comeback this year.
There have been a few analyst ratings in the past week that point to the potential of Facebook stock to grow further in 2017. Last week, Credit Suisse named Facebook as one of its top two picks in consumer Internet stocks and reiterated its “outperform” rating.
Goldman Sachs Group Inc’s (NYSE:GS) Heath Terry rated FB stock as “buy,” as he believed that the fundamental outlook for its business was positive. However, Terry said that the main risk is the private companies coming to market, which may draw away attention. Notable companies that could tap the public markets include Uber, Xiaomi, Airbnb, Inc., Snap Inc., and Spotify AB, etc. (Source: “Alphabet and FANG to Shine Despite Snap, Uber IPOs, Says Goldman,” Barron’s, January 3, 2017.)
Last Tuesday, Aegis Capital Corporation initiated coverage on FB stock with a “buy” rating and a $150.00 price target. Despite the decline suffered by Facebook stock in 2016, Aegis analyst Victor Anthony likes the strength in properties such as “Instagram” and “Messenger” and believes that the tech company can sustain its growth.
On the revenue side, we see user growth, advertiser demand, time spent, live video, video ads, better ad targeting, and Instagram helping to offset the lack of ad load growth. And on the expense side, Facebook has typically guided costs aggressively, only to come in below those estimates. We expect the same for 2017. We see Facebook as the best way to continue to play the social media user time and advertising shift.
(Source: “Aegis Capital Starts Facebook at Buy,” StreetInsider.com, January 3, 2017.)
Investors are concerned about the likely slowdown in revenue growth as well as the capital expenses which will rise in the coming quarters. Facebook will report fourth-quarter and full-year 2016 earnings soon, and all focus will be on management guidance.
As Facebook CEO, Mark Zuckerberg focuses on the future of the company in global web connectivity, artificial intelligence (AI), and virtual reality (VR), and investors will be focusing on the fourth-quarter results and guidance. Following the Q3 results, FB stock had gone down significantly. It was trading above $130.00 before the results were announced, but investors were spooked by the management warning of increasing investment substantially in the year 2017.
Investors will also focus on the user growth numbers and revenue growth as the company prepares for its future competitors, like Snap Inc.