Despite The Headlines, Facebook Isn't Losing Advertisers, KeyBanc Says In Earnings Preview

The headline risk around a data scandal apparently has failed to dent ad growth at Facebook, Inc. FB, according to KeyBanc Capital Markets' checks with ad agency executives.

The Analyst

Previewing Facebook's first-quarter results, KeyBanc analyst Andy Hargreaves maintained an Overweight rating and $245 price target for the company's shares. 

Facebook is scheduled to release its Q1 report after the market close Wednesday, April 25.

The Thesis

Facebook is likely to report above-consensus revenues and earnings per share in Q1, Hargreaves said in a Sunday note. The analyst said he remains comfortable with his revenue and EPS estimates of $11.5 billion and $1.43, respectively, which are slightly above the consensus estimates.

Despite significant media coverage and investor concern, the analyst said Facebook can grow its ad revenues in line with or ahead of KeyBanc's 41-percent year-over-year constant currency growth projection.

Hargreaves said he's comfortable with his revenue growth outlook for the next two years. Although the analyst projects some incremental spending on privacy and security, KeyBanc's expense estimate has baked in this development, he said. 

There was no meaningful change in spending trends on Facebook in recent weeks and virtually no hesitancy from advertisers to continue spending, the analyst said.

Engagement is key, going forward, and KeyBanc sees limited signs of material impact to date, Hargreaves said. 

"Further, advertisers do not believe the closure of Partner Categories will meaningfully damage Facebook's targeting capability, as Facebook's extensive first-party data should allow it to replicate the desired audience without third-party data." 

Price Action

Facebook's shares have gained about 12.5 percent over the past year but are down more than 10 percent year-to-date.

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