Facebook Continued To Deliver Growth

Facebook Inc FB reported robust results for Q3 2016, although earnings decline 10 percent above expectations. Citi’s Mark May maintained a Buy rating on the company, while raising the price target from $158 to $162.

Continued Growth

Facebook reported its Q3 revenues at $7 billion, in line with the estimate and the consensus, with adjusted EBITDA of $4.6 billion beating the estimate, driven by lower than anticipated expenses.

EPS came in at $1.09, 17 percent above the estimate, while the GAAP EPS of $0.81 was 15 percent ahead of the estimate.

“KPIs like MAUs and DAUs were strong and also in-line w/ expectations. And the DAU/MAU ratio increased sequentially in each region, which should help alleviate some of the competitive concerns,” May mentioned.

The company reported monthly active users (MAUs) of 1.79 billion, with daily active users (DAUs) of 1.18 billion, with both metrics beating Q3 expectations.

Soft Guidance

However, non-GAAP opex increased 37 percent year-on-year, and management reduced its CY16 guidance to 40-45 percent.

Facebook shares dropped 7 percent in after-hours trading, following Facebook guiding to slower revenue growth in Q4.

“We believe this soft guidance is already reflected in forecasts and expectations and that these comments are largely meant to manage expectations,” May added.