Facebook's Q3 Earnings: Here's What Wall Street Thinks

Facebook Inc. FB stock dropped 2.6 percent on Thursday after the company reported a third-quarter earnings beat that failed to wow the market. A number of Wall Street analysts weighed in on Facebook following the report.

Here’s a rundown of what they had to say.

Voices From The Street

Citi analyst Mark May said Facebook management was clearly trying to keep investor expectations reigned in on the earnings call. “While mgmt continues to temper expectations, fundamentals remain quite strong and we not only see multiple levers of new growth but also see mgmt’s 2018 opex growth guidance as unobtainable,” May wrote.

Morgan Stanley analyst Brian Nowak said Facebook’s 43 percent revenue to cash flow conversion rate continues to impress. “More impressive, FB is delivering this cash flow even while aggressively investing in headcount, ad measurement/improvement, augmented reality, virtual reality, video content, Instagram, Messenger, Whatsapp, Aquila, among other items,” Nowak wrote.

William Blair analyst Ralph Schackart said heavy 2018 expenses are part of the equation of preserving advertising and video content integrity. “The company credited its expected investment to the emphasis on security and transparency of ads, video content spending, and long-term initiative investment,” Schackart wrote.

See Also: Here's What The Last 12 Months Looked Like For Facebook

Concerns, But Still Bullish

BMO analyst Daniel Salmon said Facebook is showing early signs of margin erosion. “We remain on the sidelines around the potential content costs necessary to drive TV budgets to the platform, a lack of visibility into monetization at Messenger and WhatsApp, and the emergence of Amazon's advertising business,” Salmon wrote.

Oppenheimer analyst Jason Helfstein said investors can complain all they want about rising expenses, but it's part of the package for a high-growth company like Facebook. “With the fragmentation of media and communication, we believe consumers will increasingly find media and information through their social graph, positioning FB in the middle of this information exchange,” Helfstein wrote.

Ratings And Price Targets

Despite Thursday’s sell-off, most of Wall Street remains bullish on Facebook stock, although some analysts are more bullish than others:

• Citi has a Buy rating and $210 target.
• Morgan Stanley has an Overweight rating and $200 target.
• William Blair has an Outperform rating and no target.
• BMO has a Market Perform rating and $170 target.
• Oppenheimer has an Outperform rating and $200 target.