Facebook Concerns Are 'Overdone,' KeyBanc Says Ahead Of Q4 Print

Facebook Inc FB's decision to change its news feed isn't a cause for concern, according to a KeyBanc Capital Markets analyst.

The Analyst

KeyBanc Capital Markets' Andy Hargreaves maintains an Overweight rating on Facebook's stock with an unchanged $220 price target.

The Thesis

"Legitimate concerns" exist about Facebook's social impact, but any near-term concerns surrounding changes to Facebook's news feed are "overdone," Hargreaves said in a research report. (See the analyst's track record here.)

Facebook's move to prioritize friends, family and local content does not imply a reduction in ad volume, but could sustain consumer usage and grow advertising demand over the longer-term, the analyst said. Even if total ad volume does fall, it could be offset by increased pricing, he said.

Facebook is scheduled to report its fourth-quarter results after Wednesday's market close, and Hargreaves offered the following points of interest investors may want to monitor:

Any update to Facebook's prior 2018 costs and expenses guidance, which were said to be up 45 to 60 percent in 2018.

• Commentary on Facebook's video platform Watch, which so far offered "limited signs of success to date."
• Facebook's CPMs have accelerated for three consecutive quarters and should show 35-percent year-over-year over growth in the fourth quarter, which would be in-line with the third quarter's growth rate.
• Facebook is expected to earn $2.05 per share in the quarter on revenue of $12.61 billion versus the consensus estimate of $1.94 per share on revenue of $12.514 billion.

Price Action

Shares of Facebook were trading lower by around 1 percent early in Tuesday's trading session. 

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