Wedbush Feels Facebook Has 'A Virtually Insurmountable Competitive Advantage'

Facebook Inc FB is scheduled to announce its 2Q16 results on July 27, and is likely to report a revenue and EPS beat, Wedbush’s Michael Pachter said in a report. He maintained an Outperform rating on Facebook, with a price target of $145, saying that the company enjoyed “a virtually insurmountable competitive advantage.”

Pachter expects Facebook to report revenue and EPS at $6,158 million and $0.85, ahead of consensus expectations of $6,015 million and $0.81, respectively. The company could record 16 percent sequential growth in mobile ad revenue, with 5 percent growth in MAUs.

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Growth To Continue

Facebook has more than 1.6 billion monthly active users, over 1 billion daily active users, and about 3 million advertisers, which give the company a huge competitive advantage. “We expect Facebook to continue its rapid growth overseas, and expect it to expand monetization of under-penetrated Instagram, WhatsApp and Messenger assets over the coming years,” Pachter wrote.

The company is making investments in new initiatives, which are expected to drive growth over the next decade.

Although Facebook is approaching full penetration in North America and Europe, continued momentum in Asia and “rest of world” position the company well for strong ad growth over the next several quarters. “It appears that ad load, usage, and ad rates can expand for several years on a global basis, with outperformance in underpenetrated regions that should drive global ARPU higher each year,” the analyst commented.

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