Pachter: Expect Positive EPS Revisions In Upcoming Facebook Quarters

“Facebook should continue its rapid growth overseas, and should expand monetization of under-penetrated Instagram, WhatsApp, and Messenger over the coming years,” Wedbush’s Michael Pachter said in a note, reiterating an Outperform rating on the company, with a price target of $162.

Competitive Advantage

The analyst believes Facebook Inc FB has “a virtually insurmountable competitive advantage,” given its almost 1.8 billion monthly active users (MAUs) and close to 1.2 billion daily active users (DAUs), while having been able to garner 4 million advertisers.

In fact, Pachter expects the company’s initiatives to position itself for long-term growth are likely to continue over the next decade.

Q4 Expectations

Facebook is scheduled to report its Q4 2016 results after market close on February 1. The analyst expects the results to in line with or above the consensus expectations and estimates, driven by persisting mobile and video ad momentum, Facebook’s dominant market share and strength in ad pricing.

Pachter estimates the company will report revenue of $8,487 million, more or less in line with the consensus, with EPS of $1.35, marginally above the consensus forecast.

Mobile ad revenue growth is expected to have grown 23 percent quarter-on-quarter in Q4, as compared to the 34 percent growth in the year ago quarter.

MAUs are expected to have grown 15 percent year-on-year, with about 1 percent quarter-on-quarter growth in Europe and North America, and about 4 percent growth in Asia and the Rest of World.

“The U.S. election likely helped to drive time spent and other viewership and engagement metrics higher, boosting CPMs, while a large share of digital advertising budgets continue to flow to Facebook,” the analyst stated.

Pachter expects the company’s other social media platforms to witness long-term growth, given that Instagram has just started to monetize, while WhatsApp and Messenger are expected to add more than $3 billion to Facebook’s revenue growth over the next two years.